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Labour market adjustment to third‐party competition: Evidence from Mexico
Author(s) -
Robertson Raymond,
Halliday Timothy J.,
Vasireddy Sindhu
Publication year - 2020
Publication title -
the world economy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.594
H-Index - 68
eISSN - 1467-9701
pISSN - 0378-5920
DOI - 10.1111/twec.12918
Subject(s) - economics , china , clothing , competition (biology) , wage , labour economics , distribution (mathematics) , real wages , ecology , mathematical analysis , mathematics , archaeology , biology , political science , law , history
Abstract China's exports reduce wages in importing countries, but few studies have looked at competition in third‐party markets. We examine labour market outcomes in Mexico's apparel and textile sectors associated with US apparel and textile imports from China. Using data on US imports in conjunction with quarterly Mexican labour force surveys, we show that US imports from China are associated with a reduction of employment in Mexico's apparel and textile sectors. These effects are the most pronounced for the least educated. Wages were not impacted on net except for possibly the poorest which would indicate stronger local labour market ties in the left tail of the wage distribution. Finally, the effects of trade‐induced demand shocks dissipate after about two quarters indicating low firm‐level adjustment costs.