Deindustrialization, Domestic Savings, and Labor, in Mexico and Central America

This study analyzes the determination of the deindustrialization process experienced by Mexico and the Central American countries, and the repercussions on employment, domestic savings, investment, and economic growth. The methodology consists of estimating VAR models with panel data from the 1990-2018 period. The results indicate that the percentage occupied by the manufacturing sector in GDP increases in the face of shocks to exports, investment, and the ratio of female to male salaried employment, and does not have a significant response to the increase in remittances. A measure of relative deindustrialization is introduced, defined as the ratio of the value-added of the manufacturing sector to imports, whose responses to shocks to exports and remittances are negative, but its response to salaried employment is positive. Faced with shocks to the ratio of female to male salaried employment, the responses of the domestic saving rate, per capita international reserves, and labor productivity was positive, but the response of the trade deficit was negative. These results show that deindustrialization must be analyzed in the context of the labor market of the countries and consider gender aspects.