International Competition and Industrial Evolution: Evidence from the Impact of Chinese Competition on Mexican Maquiladoras

62 Pages Posted: 27 Jun 2013 Last revised: 14 Jul 2013

See all articles by Hale Utar

Hale Utar

Grinnell College

Luis B. Torres-Ruiz

University of Colorado at Boulder; Bank of Mexico

Date Written: June 18, 2013

Abstract

Effects of the competition between the two South locations (Mexico and China) in the Northern market (U.S.) is analyzed. By employing a new plant-level data set that covers the universe of Mexican export assembly plants (maquiladoras) from 1990 to 2006 and exploiting the exogenous acceleration of Chinese imports in conjunction with the WTO accession of China, the empirical analysis reveals substantial effect of intensified Chinese competition on maquiladoras. In particular, competition from China has negative and significant impact on employment and plant growth, both through the intensive and the extensive margin, in the most unskilled labor intensive sectors of those threatened by competition from China, leading to sectoral reallocation. No major effect is found through reallocative channels within industries, but significant increases in plant productivity and skill intensity are quantified in maquiladoras attributable to competition to China. The results lend substance to field studies and anecdotal evidence on industrial upgrading in Mexican Maquiladoras in response to competition with low-wage locations such as China.

JEL Classification: F14, F61, L25, L60

Suggested Citation

Utar, Hale and Torres-Ruiz, Luis B., International Competition and Industrial Evolution: Evidence from the Impact of Chinese Competition on Mexican Maquiladoras (June 18, 2013). Bielefeld Working Papers in Economics and Management No. 13-2013, Available at SSRN: https://ssrn.com/abstract=2285376 or http://dx.doi.org/10.2139/ssrn.2285376

Hale Utar (Contact Author)

Grinnell College ( email )

1210 Park Street
HSSC 2342
Grinnell, IA 50112
United States
+1 641 2699225 (Phone)

HOME PAGE: http://www.grinnell.edu/user/utarhale

Luis B. Torres-Ruiz

University of Colorado at Boulder ( email )

1070 Edinboro Drive
Boulder, CO CO 80309
United States

Bank of Mexico

Av. 5 de Mayo 18
Piso 4
Mexico City, 06059
Mexico

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