The Effect of Industrialization on Children’s Education – The Experience of Mexico

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The Effect of Industrialization on Children’s Education –

The Experience of Mexico

Anne Le Brun, Susan Helper, and David I. Levine1

Abstract: We use census data to examine the impact of industrialization on children’s education in Mexico. We find no evidence of reverse causality in this case. We find small positive effects of industrialization on primary education, effects which are larger for domestic manufacturing than for export-intensive assembly (maquiladoras). In contrast, teen-aged girls in Mexican counties (municipios) with more growth in maquiladora employment 1990-2000 have significantly less educational attainment than do girls in low-growth counties. These results shed light on literatures analyzing the impacts of industrialization, foreign investment, and intra-household bargaining power.

During the early 1990s Mexico was a poster child for the “Washington Consensus” of export-led manufacturing growth (Naim, 2000; Hanson, 2004). Mexico both increased its manufacturing employment by more than half and shifted from an emphasis on import substitution to export-oriented policies. The lion’s share of the increase in manufacturing employment was due to export processing plants known as maquiladoras (or maquilas), whose employment more than tripled. Maquilas became the nation’s most important source of export revenue, surpassing even oil. 2

The “Peso crisis” in the middle of the decade made clear that export-oriented industrialization was not sufficient to create economic development. What remains unclear, though, is whether Mexico’s industrialization strategy was beneficial or harmful to other dimensions of development such as education.

This question is important because the dimensions of development such as economic growth, health, and education do not always change in unison (Easterly, 1999). In fact, in some important early cases, industrialization harmed children’s health (Nicholas and Steckel, 1991, and Flood and Harris, 1996).

Turning to education, the relationship between manufacturing growth and education is ambiguous. Industrialization may increase education by increasing parents’ incomes, public sector revenues, returns to skill, and (by promoting urbanization) children’s access to schools. At the same time, growth in manufacturing jobs can reduce education by increasing the opportunity costs of keeping children in school, reducing returns to skill (if manufacturing jobs are very low skilled), and inducing migration and other social disruption that can hinder school attendance.

Importantly for our purposes, some areas of Mexico received far more factories than others. Also, public school funding was determined by population, not local income. Thus, we can separate the effect of industrialization on the supply of schooling from the impact on the demand for schooling. Our data also distinguish manufacturing for the domestic market, and export processing in maquiladoras. Thus we also examine the differential effects of globally-oriented industrialization.

We use household- and municipio-level data from the 1990 and 2000 Censuses. (Municipios resemble U.S. counties.) We construct our sample to focus attention on those municipios at risk for industrialization. Thus we exclude Mexico City, which was losing manufacturing jobs. We also exclude very poor rural areas that were affected by a large welfare program (PROGRESA/OPPORTUNIDADES) that had an independent effect on children’s enrollment in school.

Our main findings are:

There is no evidence of reverse causality in plant location. Municipios with higher 1990 education are not more likely to see an increase in maquila or domestic manufacturing employment than those with lower education. These results provide evidence against the hypothesis of endogenous factory location. Our specification controls for time-invariant municipio characteristics that affect children’s outcomes, though we are still incapable of perfectly controlling for the possibility of time-varying municipio characteristics. To avoid problems of non-random migration, we focus our analysis on non-migrant families, though our results change little when we include migrants.

Industrialization, particularly when domestically focused, is correlated with higher primary education. In our sample, the percent of the workforce employed in maquilas increased from 2.3% to 4.5% between 1990 and 2000. This industrialization is correlated with an increase in educational attainment for 7-12 year olds of almost one week (.022 *.833 *52). Had this same increased employment occurred in domestic manufacturing, the impact on primary education would have been more than twice as great. However, growth in maquila employment is significantly correlated with a week’s less education attainment for teenage girls.

These effects are small, perhaps because Mexico’s manufacturing is neither high-skilled nor well-paid relative to other occupations. Increases in manufacturing or maquila employment in a municipio do not have a statistically significant impact on household income in that municipio (though the sign is positive), or on skill premia (where the sign is negative). At the same time, maquilas dramatically increased the demand for women’s labor. When mothers became employed in manufacturing, daughters dropped out of school, presumably to replace mother’s labor in the household. This effect is absent when fathers became employed in manufacturing.

These results shed light on literatures relating to the social effects of industrialization, foreign investment, and intra-household bargaining power. These results suggest that industrialization, if it is focused on low-skill assembly-intensive manufacturing, does not increase returns to education. In contrast to previous literature, we find that providing income to women may reduce investments in children, if obtaining the income requires women to work outside the home and doesn’t provide substitutes for women’s labor in household production.

The rest of the paper is structured as follows. We first describe the process of maquila-led industrialization that Mexico underwent during the 1990s. We then turn to a literature review and theoretical description of how manufacturing, and maquila manufacturing in particular, may affect children’s education, by affecting income, urbanization, and intra-household bargaining. In a third section, we present our empirical methods. We then describe our data, and our results. .

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