Research Insights: How Did Mexican Local Labor Markets Respond to the Rising Import Competition in Their Domestic Markets?

Due to an increase in import competition from the early 2000s, Mexico experienced a loss in manufacturing employment of 1.8 percentage points accompanied by a decrease in wages in the short run. These negative effects persisted but its size decreased in absolute value. Twenty after the shock, the negative effects have disappeared. This fade out on the aggregate effects on employment happened through several adjustments in the labor market. Wage employees were substituted by contract workers, and formal workers substituted by informal workers