are reported in Table 8. The first three columns show the estimated coefficients for market potential and the last three columns for market access. Compared to other sectors, it is the services sector that benefits most from an increase in market access or market potential.<sup>23</sup> A 10 percent increase in market potential is associated with 1.2 percent, 3.0 percent, and 4.1 percent increases in employment in the manufacturing, commerce, and services sectors respectively. Similarly, a 10 percent increase in market access is associated with 1.6 percent, 1.8 percent, and 2.5 percent increases in employment in manufacturing, commerce, and services respectively.

Results also show that more urbanized or more educated localities benefit more from an increase in market potential, and less from an increase in market access.<sup>24</sup> Finally, localities seem to benefit less from an increase in domestic market access or domestic market potential during the nafta period. As mentioned earlier, the net effect is positive, and the result could be explained by the increasingly important role of international market access at the expense of domestic market access under trade openness.

Table 8: Sectoral heterogeneous effects of market access and market potential

||Market Pot|ential: Emplo|yment|Market Ac|cess: Employ|ment|
|---|---|---|---|---|---|---|
|**Variables**|Manufacturing|Commerce|Services|Manufacturing|Commerce|Services|
|Market Potential or Market Access|0.119*|0.303***|0.413***|0.158***|0.176***|0.246***|
||(0.0623)|(0.0418)|(0.0807)|(0.0184)|(0.0125)|(0.0807)|
|mpormax Metropolitan dummy|0.0332**|0.00657|-0.0148|0.0363*|0.0711***|-0.0148|
||(0.0139)|(0.00681)|(0.0161)|(0.0193)|(0.0133)|(0.0161)|
|mpormax Education|0.0266***|0.0195***|0.0217***|-0.0399***|-0.0407***|0.0217***|
||(0.00451)|(0.00241)|(0.00518)|(0.00590)|(0.00342)|(0.00518)|
|mpormaxnaftadummy|-0.0146|-0.0596***|-0.0744***|-0.0850***|-0.101***|-0.0744***|
||(0.0173)|(0.0122)|(0.0221)|(0.00356)|(0.00206)|(0.0221)|
|mpormax Capital city|-0.00819*|-0.0117***|-0.00924|-0.0470**|-0.0121|-0.00924|
||(0.00427)|(0.00379)|(0.00568)|(0.0228)|(0.0363)|(0.00568)|
|mpormax Oil dummy|-0.0200|0.0163|-0.000259|-0.391|0.683***|-0.000259|
||(0.0237)|(0.0253)|(0.0276)|(0.485)|(0.205)|(0.0276)|
|Above median education|0.197***|0.125***|0.152***|0.234***|0.0795*|0.152***|
||(0.0648)|(0.0295)|(0.0492)|(0.0714)|(0.0441)|(0.0492)|
|Above median population|-0.299*|0.166*|0.438**|0.513***|0.829***|0.438**|
||(0.171)|(0.0863)|(0.192)|(0.102)|(0.0779)|(0.192)|
|Observations|7839|8144|7726|9165|9747|7726|
|Adj. R-squared|0.168|0.534|0.412|0.162|0.403|0.412|

_Note_ : * denotes significance at the 10% level, ** denotes significance at the 5% level, and *** denotes significance at the 1% level. The estimates are from the instrument regression with the doughnut iv calculated by excluding all localities within a 25km circle. Results are robust to others iv strategies (road count and efficient road units).

Table 14 and Table 15 in Appendix C show the results for the instrumented regressions of market access and market potential on total employment for different subsamples stratified by region (border, capital, central, North and South). As can be seen, all things else equal, the North and the states from of market access or im- capital benefit greater impact improved 23The services sector accounts for about 60 percent of Mexico gdp 24This result is consistent with the use of a different human capital proxy i.e., locality literacy.

23