Foreign trade and its impact on employment: The Mexican case

This paper discusses the relationship between foreign trade and employment in a small open economy, and carries out some empirical work using Mexican data. It is argued that employment multipliers are not stable if intermediate inputs are imported. Actual employment multipliers will be given by the relationship between effective demand and installed capacity in each sector, and will depend strongly on whether quotas or tariffs are in operation. It is also found that Mexican exports are capital intensive relative to its imports.