Volume 44, Number 173,
April-June 2013
From Recession to Recovery:
Production and Employment in Mexico and The State of Mexico
Pablo Mejía, Sandra Ochoa and Miguel Ángel Díaz

In summary, the behavior of fdi and remittances allows us to argue that the latter were pro-cyclical during the Great Recession, which contributed to magnifying its effects on production and employment at both the national and state level. Still, the reaction during the subsequent phase of expansion reflects acyclical behavior, making it appear that remittances did not contribute at all to the recovery of production and employment.


Following nearly a year of decline, as a result of the negative impact of the Great Recession, the economies in Mexico and The State of Mexico began a sustained recovery starting in the first and second halves of 2009, driven by growth in us demand, in the framework of strong synchronization between their economic cycles. The data presented in this text, however, provides evidence for key differences by sector and state both in production and employment.

In general, production seems more sensitive than employment to the us cycle, while the secondary sector reacts strongest to foreign demand. These results are not surprising if we take into account that the secondary sector, dominated by manufacturing production, generates commercial goods that are susceptible to being exported and imported, and as such, are subject to international competition and fluctuations. By specializing in the generation of non-commercial goods, the services sector has a greater margin to maneuver and amass labor in such a way that the fluctuations in employment are less pronounced. Moreover, by representing more than two thirds of state and national production and employment, the dynamics of the service sector influence the total, counteracting the greater effects of the secondary sector.

Our analysis also shows a similar drop in temporary and permanent employment, but stronger recovery for the former, which allows us to hypothesize that temporary employment is replacing permanent employment as a business strategy to reduce costs. Still, additional research will be necessary to prove this conjecture.

Our analysis additionally suggests that commerce may have served as an important mechanism to transmit the current us cycle, as its fall and recovery have been highly synchronized with production and employment dynamics in Mexico and The State of Mexico. In turn, drastic decreases in fdi and remittances only further deepened the recession, but did not affect the subsequent recovery of productive activity, as their behavior reflects clear stagnation during the current expansion period.

In general, one of the most important lessons of this recent experience is that the economies of Mexico and its states are highly fragile, despite significant stabilization efforts that have been implemented over the past decades. This reality raises a broad range of research questions related to the effects of specific shocks on commercial and capital flows in state economies, a field that national economic literature has left practically untouched.

Published in Mexico, 2012-2017 © D.R. Universidad Nacional Autónoma de México (UNAM).
PROBLEMAS DEL DESARROLLO. REVISTA LATINOAMERICANA DE ECONOMÍA, Volume 49, Number 192, January-March is a quarterly publication by the Universidad Nacional Autónoma de México, Ciudad Universitaria, Coyoacán, CP 04510, México, D.F. by Instituto de Investigaciones Económicas, Circuito Mario de la Cueva, Ciudad Universitaria, Coyoacán,
CP 04510, México, D.F. Tel (52 55) 56 23 01 05 and (52 55) 56 24 23 39, fax (52 55) 56 23 00 97, www.probdes.iiec.unam.mx, revprode@unam.mx. Journal Editor: Alicia Girón González. Reservation of rights to exclusive use of the title: 04-2012-070613560300-203, ISSN: pending. Person responsible for the latest update of this issue: Minerva García, Circuito Maestro Mario de la Cueva s/n, Ciudad Universitaria, Coyoacán, CP 04510, México D.F., latest update: Feb 23th, 2018.
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