Trade Diversion and Jobs: Evidence from Mexican Municipalities

Carlos Rodriguez Castelan, Emmanuel Vazquez and Hernan Winkler

No 11419, Policy Research Working Paper Series from The World Bank

Abstract: This paper examines the local effects of the 2018–19 U.S.-China trade disruptions on Mexico. Combining detailed municipal-level customs data with U.S. tariff schedules, it estimates that municipalities with greater export concentration in products targeted by U.S. tariffs on China (hereafter, tariff exposure) experienced significantly larger nearshoring dividends. An increase of 1 percent in tariff exposure led to a 4.3 percent increase in municipality-level exports to the United States, with gains concentrated in northern and south-central states. These export gains translated into broad labor market improvements: total labor income rose by 5.6 percent for each 1 percent increase in tariff exposure, driven by job creation rather than wage growth as average earnings remained unchanged. The effects were heterogeneous across skill levels, with the largest employment rate gains among semi-skilled workers. Beyond job quantity, the shock improved job quality: each 1 percent increase in tariff exposure reduced labor informality by 0.25 percentage points, with newly created jobs disproportionately being formal. Effects were driven primarily by manufacturing but extended to services through local spillovers. The findings indicate that trade policy changes between major economies can significantly reshape the spatial distribution of economic activity and the quantity and quality of jobs in third-party countries.

Date: 2026-06-29
References: Add references at CitEc
Citations:

Downloads: (external link)
https://documents.worldbank.org/curated/en/0999364 ... bd9-4460f5692be6.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (https://documents.worldbank.org/curated/en/099936406292629013/pdf/IDU-02627478-9197-44c8-9bd9-4460f5692be6.pdf [302 Found]--> http://documents1.worldbank.org/curated/en/099936406292629013/pdf/IDU-02627478-9197-44c8-9bd9-4460f5692be6.pdf [301 Moved Permanently]--> https://documents1.worldbank.org/curated/en/099936406292629013/pdf/IDU-02627478-9197-44c8-9bd9-4460f5692be6.pdf)

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:wbk:wbrwps:11419

Access Statistics for this paper

More papers in Policy Research Working Paper Series from The World Bank 1818 H Street, N.W., Washington, DC 20433. Contact information at EDIRC.
Bibliographic data for series maintained by Roula I. Yazigi ().