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Are manufacturing workers benefiting from trade? The case of Mexico’s manufacturing sector

Luis Villanueva (Denison University, Granville, Ohio, USA)

International Journal of Development Issues

ISSN: 1446-8956

Article publication date: 4 April 2017

Abstract

Purpose

This paper aims to focus on the distributive implications of trade by studying how manufacturing workers’ relative earnings and employment have changed in post–North American Free Trade Agreement (NAFTA) Mexico (1995-2011).

Design/methodology/approach

Input–Output analysis and inequality analysis were combined to reveal the empirical relationship between trade, wage inequality and employment in the manufacturing sector in post-NAFTA Mexico.

Findings

The results reveal that the manufacturing sectors that produce for the export market tend to pay among the lowest wages and yet employ around half of the manufacturing working population; wages in labor-intensive sectors have not been increasing, while wage inequality has been rising; and employment creation due to trade is not always positive and sustained, hence does not seem to be a stable source of jobs. The paper concludes by discussing policy implications of the findings.

Originality/value

The main focus of the existing literature has been to explain the disconnection between trade and growth. This paper shifts the focus towards the distributive dimension of trade (rather than growth) by focusing on how manufacturing workers' relative earnings and employment have changed in post-NAFTA Mexico (1995-2011). Hence it attempts to contribute to the existing literature on the distributive implications of trade.

Keywords

Acknowledgements

The author would like to thank Pablo Ruiz-Napoles, Xiao Jiang, Sohrab Behdad and the anonymous referee(s) for very helpful comments and suggestions. The author also benefited greatly from discussions with the participants in the panel “Labor and Education Issues” at the International Input-Output Association conference in Mexico and the 2016 Easter Economics Association conference panel session on “Inequality, Employment and Growth”. The responsibility for the text is the authors.

Citation

Villanueva, L. (2017), "Are manufacturing workers benefiting from trade? The case of Mexico’s manufacturing sector", International Journal of Development Issues, Vol. 16 No. 1, pp. 25-42. https://doi.org/10.1108/IJDI-08-2016-0048

Publisher

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Emerald Publishing Limited

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