Question

Why is there no equivalent to maquiladoras on the United States side of the U.S.-Mexican border?

Answer 1

In an analysis, we are able to compute cross-border elasticities to assess the impact that maquiladora
activity has on U.S. border-city employment not only for the entire U.S.-Mexico border, as well
as consistent estimates for individual border cities and specific industries within each border city.
We find that a 10 percent increase in maquiladora production on the Mexican border city leads to
a 0.5 to 0.9 percent increase in employment on the U.S. side. However, the results are not
homogenous along the U.S.-Mexico border. For instance, employment growth in San Diego,
California is negatively impacted by the nearby Mexican maquiladora activity, while Texas
border cities enjoy large benefits. Furthermore, the employment effects are strongest for
transportation and warehousing, wholesale trade, FIRE and services while effects on
manufacturing are not statistically significant. This last finding is likely due to a transition to
modern supply chains that often require significant on-site or just-in-time inventory. These
requirements, combined with the uncertainties in crossing times and new security requirements
(after 9/11), have moved many suppliers to Mexico that were once on the U.S. side of the border. We find significant differences before and after 2001, when border security begins to rise and
the maquiladora industry entered a severe recession and extensive restructuring. In order to test
whether there is a difference in the maquiladora cross-border impacts on U.S. border cities after
2001, we split the sample into two periods. We find a significant reduction in the overall cross-
border maquiladora impact into employment in U.S. border cities after 2001. However, when
looking at the effects by border city and by sector, cross-border maquiladora elasticities become
larger after 2001, especially in transportation and warehousing, wholesale trade, and services
sectors. Such findings validate the idea that the maquiladora industry is now more important for
employment growth in services-related sectors in U.S. border cities.