Fears of NAFTA in the United States were largely based on the belief that Mexicans and U.S. workers were substitutes: lowering barriers would allow competing products into the United States and investment outflows that would cause U.S. workers to lose their jobs to Mexico. While this may have been true when NAFTA first went into effect, subsequent production specialization between Mexico and the United States may suggest that Mexican and U.S. workers are now complements. In particular, NAFTA may have induced production restructuring throughout North America to generate integrated value chains in which workers in the three NAFTA countries work together to produce final products. This paper formally tests this idea using matched high-frequency U.S. and Mexican data. The main results suggest that, during the NAFTA period, Mexican and U.S. production workers are complements, rather than substitutes, suggesting that both countries could benefit from viewing the economies as partners rather than competitors. Prior to NAFTA, U.S. and Mexican production workers were substitutes.
labor demand, Mexico, trade and labor markets
Economic Policy | International and Comparative Labor Relations | Labor Economics
Mission Foods Texas-Mexico Center
The author thanks without implicating the Texas-Mexico Center at SMU for support and comments, Eugene Beaulieu, Daniel Lederman, David Kaplan, and Anil Kumar for helpful comments and discussion. Laura Gould provided outstanding research assistance.
Robertson, Raymond, "Are Mexican and U.S. Workers Complements or Substitutes?" (2018). Mission Foods Texas-Mexico Center Research. 3.