Are manufacturing workers benefiting from trade? The case of Mexico’s manufacturing sector

This paper aims to focus on the distributive implications of trade by studying how manufacturing workers’ relative earnings and employment have changed in post–North American Free Trade Agreement (NAFTA) Mexico (1995-2011).

Input–Output analysis and inequality analysis were combined to reveal the empirical relationship between trade, wage inequality and employment in the manufacturing sector in post-NAFTA Mexico.

The results reveal that the manufacturing sectors that produce for the export market tend to pay among the lowest wages and yet employ around half of the manufacturing working population; wages in labor-intensive sectors have not been increasing, while wage inequality has been rising; and employment creation due to trade is not always positive and sustained, hence does not seem to be a stable source of jobs. The paper concludes by discussing policy implications of the findings.

The main focus of the existing literature has been to explain the disconnection between trade and growth. This paper shifts the focus towards the distributive dimension of trade (rather than growth) by focusing on how manufacturing workers' relative earnings and employment have changed in post-NAFTA Mexico (1995-2011). Hence it attempts to contribute to the existing literature on the distributive implications of trade.