Employment determination at Mexican maquiladoras: Does location matter?

Abstract

This paper develops a microeconomic model of employment at Mexican maquiladoras using panel data from border and non‐border states. Employment estimates for industry output are always positive, while wage increases depress employment only for the border panel. External factors, such as positive changes in U.S. output, contribute to maquiladora employment, while real effective exchange rate depreciations reduce employment, notably for border firms. Real exchange rate appreciations make imported inputs cheaper and create an output effect: exports fall, real wages fall, and employment increases. The NAFTA dummy variable carries a dual effect: employment rises in border firms and falls in interior firms.

Notes

Mollick is Associate Professor of Economics in the Department of Economics and Finance at the University of Texas‐Pan American, Edinburg, Texas.