Local labor markets in U.S.–Mexican border cities and the impact of maquiladora production

Abstract

Shift-share decompositions of employment positions created over 1990–2002 at U.S.–Mexico border cities show that El Paso employment change has been overwhelmingly attributed to national forces, while local and national forces roughly match employment creation at Brownsville. With such fast growing U.S.–Mexico border area as background, we implement time series labor demand models to these cities (El Paso and Brownsville) and compare movements in Mexican maquiladora production against U.S. employment and wages. Cointegration methods confirm that local shocks are more important in Brownsville than in El Paso. Specifically, 10% increases in Juárez maquiladora production lead to increases of 1.21% in El Paso’s government employment and of 0.88% in overall employment. Similar increases in Matamoros lead to gains of 1.59% in Brownsville’s trade, transportation and utilities employment and of 1.41% in overall employment. These results support shift-share findings and are generally consistent with a more diversified industry-mix promoting higher employment creation.