The Effects of U.S.-China Trade on Employment and Wages in the U.S.-Mexico Border Region

Abstract:     
This paper investigates the impact of foreign competition from China on employment and wages in four U.S.-Mexico border counties: Santa Cruz, AZ, San Diego, CA, El Paso, TX, and Webb, TX. Using disaggregated industry-level data between 1992 and 2006, we find that increased trade with China is associated with significantly lower county-industry employment and wages. In contrast, and as expected, increased imports from Mexico are positively related to increased employment and wages in U.S. Mexico border counties. The results indicate that the U.S.-Mexico supply-chain relationship related to the maquiladora industry is significantly affected by Chinese competition. Implications for policy include an increased focus on federal programs that are intended to diversify the border economy.

Keywords: Employment, Trade Patterns, China, Export Competition

JEL Classifications: F13, F43, F23

Working Paper Series