Short-run maquiladora employment dynamics in Tijuana

The Tijuana maquiladora sector has grown enormously over the past two decades. Short-term time series characteristics of this segment of the regional economy are analyzed in an attempt to clarify labor market behavior associated with this remarkable performance. Parameter estimation is accomplished using linear transfer function analysis. Data are drawn from the January 1980–December 2000 sample period. Empirical results indicate that real wage rates, maquiladora plants, United States industrial activity, and the real exchange rate of the peso play significant roles in determining month-to-month fluctuations in maquiladora employment. Sub-sample simulation exercises are conducted using a random walk benchmark in order to examine forecast accuracy. Empirical results indicate that the linear transfer function technique provides relatively accurate forecasts all step-lengths.Helpful comments were provided by Tschangho John Kim, Tim Roth, Richard Posthuma, Henry Herzog, Mohammed Mohsin, and two anonymous referees. Partial financial support was provided by El Paso Electric Company, City of El Paso Office of Economic Development, and Wells Fargo Bank of El Paso.Views expressed in this study are strictly those of the authors and do not necessarily reflect the positions of the Federal Reserve Bank of Dallas or of the Federal Reserve System.Received: October 2002/Accepted: October 2003