Trade, offshoring, and manufacturing employment volatility in Mexico

Abstract We find that manufacturing sectors specializing in the processing and assembly of foreign‐owned intermediate goods had higher employment volatility in Mexico from 2007 to 2020, whereas specialization in trade had limited impacts on volatility. In general, the co‐evolution of trade integration and international outsourcing complicates efforts to disentangle the distinct effects of trade versus offshoring on developing‐country labor markets. We approach that problem by using official statistics that distinguish between production sharing processes typical of offshoring‐intensive sectors versus traditional trade activities. The empirical strategy exploits regional and temporal variation within industries using data supplied for this project.