Employment, production and manufacturing wages in Mexico in the face of the COVID-19 pandemic. A spatial VAR análisis

Abstract

The aim of this paper is to analyze the inter and intra-regional impacts of the COVID-19 pandemic on the employment level, production and wages in the manufacturing sector in Mexico. The methodology used is the Spatial Vector Autoregressive Models (SpVAR), which provides a spatial context that allows to examine if the lag on the external variables adds valuable information about the local variables. Also, the impulse response functions are used to quantify the influence of a given state on its neighbors (Push-out effect) and the impacts of neighbors on a given state (Push-in effect). This work shows evidence that the employed population in a state can be affected by small shocks in the growth of employment, production, wages and COVID-19 infections in neighboring states. The effect can be positive or negative depending on the sign of the coefficient. One of the conclusions is that the spread of the COVID-19 pandemic had a larger impact in regions where the manufacturing labor is more predominant with respect to the rest of the economic activity.