Appendix 12 reports the OLS results distinguishing between intermediate and final imports.<sup>14</sup> Import data in these regressions draw on the Economic Census data. There are no significant correlations between imports and labor market outcomes when all controls are included. However, the coefficients between final imports and both the labor force participation and employment rates are negative when no controls are included (column 7), while they are insignificant for intermediate imports (column 4). This could point to a more favorable role of intermediate imports relative to final imports for labor market outcomes through the employment channel, suggesting that imported inputs complement domestic or export production, thereby increasing employment. Interestingly, the results find a negative association between the expansion of final imports and inward migration, but no link with intermediate imports. There is no relationship with the informality rate.

Differentiating by broad sector of traded imports – manufacturing versus services – reveals that the observed overall pattern is driven by manufacturing imports (Appendix 13). The results are in sharp contrast for services imports (Appendix 14). Here, we find a positive and significant association of both intermediate and final services imports with labor force participation and employment rates. The coefficient between intermediate services imports and employment rates is slightly larger, which could imply that access to intermediate services for domestic or export production has larger employment benefits. Focusing on the income channel, however, the findings are less clear. Both final and intermediate services imports are positively associated with total labor incomes in Mexico, but only the estimates for final services imports are statistically significant. Finally, we find no association between services imports and labor markets through the migration and informality channels.

# 4.4 Imports for export production: GVC spillovers

Finally, we analyze the role of GVC participation for local labor market outcomes. Because many municipalities have zero changes in GVC participating establishments over the period 2004-14, our analysis focuses on GVC participation measures at the more aggregated state level. Correlates with labor market outcomes in that case are to be interpreted as GVC spillovers. Due to the lack of instruments that capture GVC participation at the state level, we can only rely on OLS estimates, as reported in Appendix 15. Our GVC spillover variables measure the share of GVC establishments in a municipality’s (i) total number of establishments, and (ii) total establishments’ employment.

Focusing on the employment-based GVC measures (columns 4 to 6), the findings suggest that GVC participation at the state level is positively correlated with labor market outcomes at the municipality level through the employment channel (both for labor force participation and employment rates). We also find a positive association with total labor incomes at the municipality level, but a negative one with average labor incomes. There are positive GVC spillovers for both employment and total labor income at the municipality level. The negative relationship between GVC spillovers and average wages implies a stronger role of the employment channel than the income channel (possibly driven again by increasing labor supply due to inward migration), given that total labor income divided by the number of workers yields average labor incomes. The results do not find any relationship between GVC spillovers and inward migration nor the informality rate. Using the GVC measures based on number of establishments instead confirms most of these patterns, although the results are less significant. This may be due to the fact that establishment-based measures do not account for differences in the economic importance of establishments.

> 14 The F-statistic does not exceed the standard significance threshold, so we cannot use the existing instrument (section 2.1) for the endogenous variable.

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