Abstract
The purpose of this paper is to analyze the effects that the Chinese competition has had on the Mexican labor market considering that both countries offer abundant low-skill workers and that China is one of the largest export countries, which directly competes with Mexico in the manufacturing industry. Particularly, panel data is used to estimate a dynamic labor demand and a dynamic wage equation to measure direct and indirect effects of the Chinese competition over these two variables. A negative direct impact was found, due to the Chinese imports into Mexico, affecting employment, and on a smaller scale affecting wages. Evidence was not found recording an indirect impact (via the US market) neither on employment nor on wages. Finally, our results indicate that increases in the share of imports of the United States from Mexico are associated with increases in employment in Mexico but not with wages.
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