26 industries. For comparability, I also show the results for estimating equations 1 and 2 without controlling for US imports in the sample of 26 industries for which I have US import data.

The second robustness check excludes the three industries in the sample (382, 388 and 389) that are directly related to auto manufacturing, along with the three corresponding caliper matched industries (3310, 3510, and 390). The reason for excluding these industries is that both Mexico and the US implemented programs to increase consumer’s demand for cars in 2009, which could potentially influence the results.<sup>9</sup> Similarly, the US also supported General Motors and Chrysler with bailout funding in December 2008 and February 2009. Both of these companies have operations in Mexico and received funds through the wage subsidy program. I thus verify that the findings are not driven by these car‐ industry specific programs instead, by checking whether the results hold when car industries are excluded from the sample.

# **4.2 Effects of the wage subsidy program on employment**

Table 3 shows the results for estimating the effects of the wage subsidy program during its duration and after the program ended. Between January and August 2009, the difference in employment levels across eligible and ineligible industries was not greater than in the pre‐program period. The estimated effect of the program is positive, ranging from 5.7 percent to 13.2 percent in magnitude, depending on the specification, but it is not statistically significant in most specifications. However, after the program ended, eligible industries had about 24 percent higher employment than ineligible industries, compared to the pre‐program difference in employment. The size of this effect is relatively stable across the different specifications in Table 3.

Table 4 examines the time path of the program’s effect in more detail, estimating a separate effect for each year after the program (2009 to 2013). The results show that the effect of the program increases over time – going from about 16 percent in 2010 to 31 percent in 2013. The findings suggest that employment after the program recovered faster in eligible industries than in ineligible industries. Figure 4 shows this difference in employment recovery visually and table 5 provides statistics to illustrate this point further. Compared to the pre‐crisis year 2007, employment in 2009 dropped by 11.6 percent in eligible industries and 20.6 percent in ineligible industries. In eligible industries, employment levels started to recover in 2010 and were back at pre‐crisis levels in 2011, while in ineligible industries, employment levels were still not back at pre‐crisis levels in 2013.

> 9 The US car buyback program was called the Car Allowance Rebate System. It was originally a 1 billion dollar program slated to run from July 1st to August 25, 2009. However, the program was so successful that the funds were exhausted by June 30th. An additional $2 billion was approved, and those funds lasted until August 24<sup>th</sup> . In Mexico, the Programa de Renovacion Vehicular began in August 2009 with a budget of 250 million pesos. It was suspended around March 2010 because of low demand.

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