Nearshoring investment in Mexico: explained by wage gaps with China
DOI:
https://doi.org/10.24275/uam/azc/dcsh/ae/2024v39n101/VasquezKeywords:
Foreign Investment , Nearshoring , China, Wages, PandemicAbstract
The objective of this article is to determine if the nearshoring investment in Mexico is explained by China's loss of participation in the US market, a result of a trade war, or is determined by other factors that have been developing for years, such as the increase in the manufacturing wage differential between Mexico and China or the global crisis due to the pandemic. The estimation of a VEC model, with quarterly data from 2006 to 2022, indicates that the loss of China's participation in the US Granger causes increases in nearshoring in Mexico and that the increase in wage differential in manufacturing between Mexico and China has favored nearshoring investment, since the Chinese labor cost has exceeded the Mexican one since 2012. The global recession caused by the pandemic and the application of tariff sanctions to China since 2018 do not cause nearshoring.
JEL Classification: F21, F60, J31, C22, L60.
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