Trade Shocks, Population Growth, and Migration

Abstract

Abstract This paper examines the effect of trade-induced changes in Mexican labor demand on population growth and migration responses at the local level. It exploits cross-municipality variation in exposure to a change in trade policy between the United States and China that eliminated potential tariff increases on Chinese imports, negatively affecting Mexican manufacturing exports to the United States. Municipalities more exposed to the policy change, via their industry structure, experienced greater employment loss. In the five years following the change in trade policy, more exposed municipalities experience increased population growth, driven by declines in out-migration. Conversely, 6 to 10 years after the change in trade policy, exposure to increased trade competition is associated with decreased population growth, driven by declines in in-migration and return migration rates, and increased out-migration. The sluggish regional adjustment is consistent with high moving costs and transitions across sectors in the short term.