Import Competition and Educational Attainment: Evidence from the China Shock in Mexico

This paper examines the impact of import competition on educational attainment in Mexico, emphasizing its effects through labor market dynamics. Using China's entry into global trade markets as a source of exogenous variation, we implement a shift-share approach to measure regional exposure to Chinese imports and employ a staggered difference-in-differences estimation strategy—marking a novel contribution to the China Shock literature. Our analysis reveals that import competition negatively affected educational outcomes, increasing dropout rates and the proportion of students falling behind their normative grade. These outcomes were accompanied by sustained wage declines, particularly in the secondary and tertiary sectors. We identify a significant decline in the returns to schooling as the primary mechanism explaining the adverse educational effects. Our findings offer novel empirical evidence linking import competition to reduced returns to schooling.