Environmental consequences of foreign sector expansion: Mexico's Maquiladora performance throughout the 1990s

The rise in assembly-oriented or Maquiladora manufacturing exports partly explains Mexico's pattern of trade specialization and foreign sector expansion during the 1990s. Yet, recent concerns have surfaced over the environmental quality changes this export-driven growth strategy has led to. Maquiladora plants export primarily to the U.S. market under duty-free or preferential tariff agreements on imported intermediate inputs. Maquiladoras' reliance on imported intermediate inputs remains significantly high throughout the 1990s. Also, Maquiladora emissions and Mexico-U.S. transfers of hazardous waste have steadily increased during this period. Recent empirical studies searching for standard environmental quality impacts of international trade and growth have overlooked the connection between production-sharing manufacturing exports and the rise in emissions and transfers of industrial pollution.; This investigation connects Mexico's northern border Maquiladora expansion with the rise in emissions and Mexico-U.S. transfers of hazardous waste during the 1990s.; Two mechanisms, a technology shock and the variety and share of imported intermediate inputs as a percentage of output, are derived from a model that isolates the Maquiladora component of manufactures from the rest of Mexico's economy. Scale refers to changes in emissions and bilateral transfers of pollution due to Maquiladora sector technology shocks. Product composition refers to changes in Maquiladora sector emissions and bilateral transfers of pollution due to changes in the Maquiladora sector wage rate and in the demand for and variety of imported intermediate inputs. An empirical analysis reveals weak evidence concerning the impact of technology shocks and the variety of imported intermediate inputs on pollution. A product composition effect is noticeable due to changes in the demand for and the share of imported intermediate inputs as a percentage of total output. Variables for Maquiladora sector type have no impact on pollution. A Mexican Peso post-devaluation effect (1995–99) on pollution is noticeable from the perspective of changes in the share and price of imported intermediate inputs. The dissertation concludes by addressing a set of policy questions should environmental safeguards be loosened or tightened on Mexico's Maquiladora-led foreign sector expansion strategy.