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Employment Associated with Exports in the State of Chihuahua, Mexico

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Employment Associated with Exports in the State of Chihuahua, Mexico EMPLOYMENT ASSOCIATED WITH EXPORTS IN THE STATE OF CHIHUAHUA, MEXICO SPRING 2017 THE UNIVERSITY OF TEXAS AT EL PASO Introduction economic performance factor. Interestingly, research results provide mixed conclusions depending of the In the 1980s, Mexico changed its foreign trade policies country’s development and the type of good being from a long period of protectionism and exported. industrialization based on import substitution (ISI), to an open market economy. Since 1986, after becoming With this background in mind, the current study a member of the General Agreement on Tariffs and assesses the exports of mining and manufactured Trade (GATT), Mexico adopted an export promotion goods vis-à-vis employment for the State of strategy to foster economic development. The Chihuahua, as the leading exporting state in Mexico. following endorsement and implementation of a The development of Input-Output (I-O) tables for series of trade agreements with diverse countries Chihuahua is convenient for conducting a regional prompted the Mexican processes of trade analysis because it reveals state inter-sectorial links liberalization and economic integration.1 that other methodologies do not provide. Such tables were built considering the productive linkages th Currently, the Mexican economy is the 17 largest in between 19 economic sectors, for years 2008 through the world, with a national Gross Domestic Product 2015. Findings of this analysis indicate that the 2 (GDP) of $1,143 billion. The dollar volume of employment associated with Chihuahua’s exporting exports in Mexico ($380.6 billion) accounts for about activities represent a substantial portion of the total one-third of its GDP, of which about 80 percent is formal employment in the State (between 44 and 64 3 traded with the United States (U.S.). Chihuahua, one percent). In terms of job generation, 591,697 of the six states adjacent to the U.S., has the largest employees were associated, directly and indirectly, to dollar volume of exports of all Mexican states. In Chihuahua´s exporting activities in 2015 in the State. 2015, Chihuahua exported $40.3 billion worth, which represents 10.6 percent of the national total (Fig. 1). 4 This study is organized into five sections. While the first section explores some economic indicators of Implementing export expansion as an economic Chihuahua as background, the second reviews the growth strategy in several countries motivated the economic growth literature and its relationship to study of this relationship; exploring the links between exporting activities. The third section describes the exports and economic growth became a relevant issue methodology employed and the model development. by the end of the 1960s. Later, researchers specifically The fourth section summarizes the empirical results, focused on the effects that exports of manufactured and the last section presents a discussion, as well as goods have on the economic growth of a nation. They further research questions to be analyzed. also have studied the behavior of employment as an Figure 1 Mexican Exports by State, 2015 (in billions of dollars) Source: Instituto Nacional de Estadística y Geografía (INEGI). 1 Chihuahua, El Estado Grande en México manufacturing center; and Delicias, the State's main agricultural hub. The Manufacturing and Commerce Geographically, Chihuahua is located in sectors generate the largest number of jobs in the State Northwestern Mexico, and it is bordered by the States with 497,941 and 290,698 respectively. The of Durango to the South, Coahuila to the East, Sinaloa Agriculture, Forestry, Fishing and Hunting sector to the Southwest, and Sonora to the West. follows, with 146,685 employees, as several Additionally, Chihuahua has an international frontier agricultural hubs across the State generate a with the U.S. bordering the States of New Mexico and considerable number of jobs in Chihuahua (Table 2). Texas to the North and the Northeast. This strategic Chihuahua produces large volumes of pecans, apples, location favors the international trade with the U.S., and oatmeal within several agricultural hubs across the becoming the Mexico’s largest trade partner. State, such as Delicias, Cuauhtémoc, Guerrero, and The population in Chihuahua was 3.76 million in the Jimenez.6 In terms of employment, the overall fourth quarter of 2016, which represents slightly over number of jobs in the State of Chihuahua has 3 percent of the total population in Mexico (Table 1). experienced a consistent growth of about 28 percent Estimates indicate that about three quarters of the since 2010 (Fig. 2). total population in Chihuahua are at their working age The State of Chihuahua is the 10th largest economy (above 15 years old). With an Economically Active in Mexico. About 3 percent of Mexico’s GDP is Population (EAP) of 1,674,505, and Total Employed attributable to the Chihuahua economy (Fig. 3).7 Population of 1,634,976 Chihuahua experienced a Chihuahua serves as crucial commercial route for relatively low unemployment rate (2.38 percent) Mexico, with billions of dollars entering the economy during the last quarter of 2016; the most recent figure as a benefit from Mexican international trade available. 5 agreements, such as the North American Free Trade Chihuahua has a relatively diversified economy, with Agreement (NAFTA). In fact, Chihuahua has the three major economic centers: Chihuahua City, the largest dollar volume of exports in the country with State capital; Ciudad Juárez, an international $40.3 billion, 10.6 percent of the national total. Table 1 Population Figures, the State of Chihuahua and National, 2016 Chihuahua National % of Nat. (A) (B) (A/B) Total Population 3,759,864 122,746,451 3.06 Population Under 15 Years Old 1,009,715 32,269,331 3.13 Working Age Population (WAP) 2,750,149 90,477,120 3.04 Economically Inactive Population (EIP) 1,075,644 36,442,320 2.95 Economically Active Population (EAP) 1,674,505 54,034,800 3.10 Employed Population 1,634,976 52,123,674 3.14 Source: Encuesta Nacional de Ocupación y Empleo (ENOE); Fourth Quarter 2016. 2 Table 2 Employment Figures, the State of Chihuahua and National, 2016 Chihuahua National % of National (A) (B) (A/B) Employed Population 1,634,976 52,123,674 3.14 Agriculture, Forestry, Fishing, and Hunting 146,685 6,920,547 2.12 Mining, Electricity, and Water 18,762 379,300 4.95 Manufacturing 497,941 8,528,629 5.84 Construction 120,972 4,346,696 2.78 Commerce 290,698 9,802,437 2.97 Accomodations and Food Services 92,570 3,848,043 2.41 Transport and Warehousing 53,676 2,647,569 2.03 Professional, Financial, and Corporate Services 91,817 3,565,476 2.58 Social Assistance 107,396 4,170,171 2.58 Other Services 131,100 5,407,012 2.42 Public Administration and International Institutions 58,246 2,217,975 2.63 Not Specified 25,113 289,819 8.67 Source: Encuesta Nacional de Ocupación y Empleo (ENOE); Fourth Quarter 2016. Figure 2 Chihuahua’s Employment by Sector, 2008 – 2016 (in thousands) Source: Encuesta Nacional de Ocupación y Empleo (ENOE); Fourth Quarter, each year. 3 Exchange Rate = 18.8031 x 1 (Banco de México, May 3, 2017) Figure 3 Gross Domestic Product in Mexico by State, 2015 (in millions of U.S. dollars, current prices) Source: Instituto Nacional de Estadística y Geografía (INEGI). Economic Growth and Exports Export-oriented policies can produce diverse results in different countries. For instance, evidence found by The relationship between economic growth and Michaely indicates that export performance affects exports appears well documented in the economic economic growth only once a country reaches a development literature.8 Yet, this relationship seemed minimum level of economic development.10 Syron and unclear during the 1960s, as it was difficult to Walsh found that, in general, underdeveloped determine if there was an interdependent or unilateral countries expect a smaller impact from exports on relationship. Several studies supported the idea that growth than developed countries due to their weak exports function as a key factor in stimulating institutional framework.11 However, this positive economic growth; such that, countries eager to relationship does not prevail in all studies.12 advance their economic growth should implement Contrasting evidence from Xu shows that exports do export-oriented policies.9 not cause growth in every nation.13 4 Alternative approaches to gauge the effects of exports for several nations such as Asian-Pacific countries on economic growth incorporate new variables of (Korea, Indonesia, Japan, and China), the Economic interest such as manufacturing exports, investment, Community of West African States (ECOWAS), the and manufacturing output.14 Although findings European Union, and Latin American countries.21 support the notion that exports have a positive effect The relationship between exports and economic on economic growth, the impact depends on the performance has also been studied in Mexico, product composition and volume of exports.15 For particularly, after structural changes associated with instance, Fosu found that if a distinction is made the NAFTA. Namely, evidence from Moreno-Brid et al. between exports of primary and manufacturing goods indicated that an increase in exports of manufacturing of less developed countries, positive impacts are goods resulted in mild growth in employment and the associated, almost entirely, with the manufacturing overall Mexican economy.22 If an export strategy is portion of exports.16 Such type of findings encourages used to stimulate employment, a detailed analysis countries to support manufacturing exports over should be performed in advance to determine which primary goods exports, as a means of maximizing specific sectors of the economy would experience the their benefits. largest impacts from exporting activities.23 By the end of the 1990s, a widespread consensus arose The most common technique used to study among economic growth researchers.
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