Labor Market Adjustment to Third-Party Competition: Evidence from Mexico

Raymond Robertson, Timothy J. Halliday and Sindhu Vasireddy

Chapter 4 in Not Just Neighbors:The Remarkable Economic Relationships in North America, 2026, pp 105-148 from World Scientific Publishing Co. Pte. Ltd.

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.

Keywords: US–Mexico Trade; Economic Integration; North American Competitiveness; USMCA / NAFTA; Global Supply Chains; Migration and Labor Markets; Wage Inequality; Cross-border Economics; Trade Policy and Development; Regional Economic Integration; US–Mexico Relations; Bilateral Trade Flows; Border Economy; Globalization and Inequality; Policy Responses to Trade Shocks (search for similar items in EconPapers)
JEL-codes: F13 F15 F22 J61 O24 P16 P52 (search for similar items in EconPapers)
Date: 2026
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