Mexico and China in the US manufacturing market: An empirical analysis

Résumé 0

"This paper conducts a disaggregated comparative analysis of China’s and Mexico’s export dynamism in the US manufacturing market over the period 1994-2017 and, against this backdrop, it estimates a dynamic panel data model through two econometric techniques to show the impact of key variables on Mexico’s export performance across manufacturing subsectors of different technology categories. Export performance is measured in terms of import market shares in the US and numerous econometric issues are addressed to produce reliable evidence. In addition to capturing some heterogeneity among different manufacturing subsectors, this study shows that: (i) a depreciation of the real exchange rate calculated for each subsector worsens (rather than improves) Mexico’s export performance, which is likely due to the high import content of Mexican manufacturing exports; (ii) a fall in domestic unit labor costs has a positive impact on Mexico’s export performance, which highlights the importance of raising labor productivity faster than wages; and (iii) a reduction in US unit labor costs deteriorates Mexico’s export performance."