Offshoring and Volatility: Evidence From Mexico’s Maquiladora Industry

Abstract

This paper studies the second-moment properties of offshoring, the arrangement whereby firms carry out particular stages of production abroad. It documents a new empirical regularity: maquiladora industries in Mexico that are associated with U.S. offshoring experience fluctuations in employment that are twice as volatile as the corresponding industries in the U.S. This finding is not attributable simply to higher volatility in the overall Mexican economy, nor to the smaller size of Mexico’s industries compared to U.S. counterparts.