Input-Trade Liberalization and Formal Employment: Evidence from Mexico

Maria Bas () and Pamela Bombarda
Additional contact information
Maria Bas: Universit Paris 1 Panthéon-Sorbonne, Centre d'Economie de la Sorbonne, https://sites.google.com/site/basmaria80/research?authuser=0

Documents de travail du Centre d'Economie de la Sorbonne from Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne

Abstract: This work investigates the role of input-trade liberalization on labor allocation between informal and formal employment in Mexico. Using individual household data for Mexico (1993-2001), we exploit exogenous input tariff changes applied to United States (U.S.) products when Mexico enters the North American Free Trade Agreement (NAFTA) in 1994. The theoretical mechanisms considered are the foreign input cost reduction that increases revenues in the formal sector and the foreign input-skilled biased channel, such that input-trade liberalization induces the reallocation of workers from informal to formal firms. Our findings confirm these mechanisms: individuals working in manufacturing industries experiencing the average reduction in input tariffs (12 percentage points) are almost 4 percent more likely to work in formal rather than informal occupations. This effect is concentrated on high-skilled workers which reinforces the input-skilled biased complementarity channel

Keywords: informal and formal employment; trade liberalization; household data (search for similar items in EconPapers)
JEL-codes: F12 F16 J16 O14 O17 (search for similar items in EconPapers)
Pages: 48 pages
Date: 2023-04
New Economics Papers: this item is included in nep-int, nep-iue and nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://mse.univ-paris1.fr/pub/mse/CES2023/23007.pdf (application/pdf)
https://shs.hal.science/halshs-04072811

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mse:cesdoc:23007

Access Statistics for this paper

More papers in Documents de travail du Centre d'Economie de la Sorbonne from Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne Contact information at EDIRC.
Bibliographic data for series maintained by Lucie Label ().