Global Markets and the Role of Geographical Proximity in Mexico’s Employment Growth MIGUEL FLORES , SANDRA MEDELL  IN, AND AMADO VILLARREAL ABSTRACT In the context of greater economic integration with global markets and structural economic reforms, this paper analyses regional and sectoral employment growth dynamics in Mexican states between 2004 and 2014. The meth- odology is based on spatial shift-share analysis that explicitly considers interregional interactions in employment while assessing potential spillover effects arising from spatial interactions among states and industrial sectors. The results suggest a competitive effect from some industries—such as those related to science and specialized suppliers, intensive scale industries and dominated providers—which led to the formation of industrial corridors of neighboring states that connect the central region with the northeast region of the country. It was also found that proximity to states such as Nuevo Leon, Queretaro, Guanajuato, San Luis Potosi, and Puebla has positively influenced neighboring states in terms of employment growth rates. The results also support the argument of some sort of de-concentration of economic activity in the capital, Mexico City, toward neighboring states. Introduction B eginning in the 1980s, Mexico, along with other Latin American countries, undertook a far- reaching program of economic reforms in different areas: trade and industrial policy, foreign investment and capital account liberalization, privatization of public enterprises, and deregulation of domestic economic activities (Padilla-P erez and Villarreal 2015). This shift in the Mexican economy changed the economic geography of the country (Aguayo 2004) led by the dynamic growth of Mexi- can exports, of which the manufacturing sector has become the center of sales abroad (Cardero and Aroche 2008). Export dynamics led to a cumulative growth of 7.5 percent in manufacturing employ- ment from 2004 to 2014 (Instituto Nacional de Estadistica y Geografia (INEGI), 2017). Economic liberalization did not lead the country to a more homogeneous and less fragmented eco- nomic structure, as initially planned; economic development has evolved differently regionally, lead- ing to a polarization within the country (Gardu~ no 2014). A process of regional redistribution of economic activity within the country occurred mainly due to sectoral structural changes in employ- ment, where manufacturing activities moved from the capital to the northern border states (Aguayo 2004; Casares 2007; Gardu~ no 2014). As a result, regional economic activities became integrated and interconnected by particular value chains; for example, the northern region is dominated by industries such as automotive and electronics, while central and southern Mexico highlights the dominance of the chemical and textile industries (Villarreal-Gonzalez et al. 2017). Disparities in employment growth in local labor markets have been a constant in the last 10 years, with the northern and central states benefiting from such patterns and contributing to polarized regional economic development Miguel Flores is a professor-researcher in Escuela de Gobierno y Transformaci on P ublica, Tecnol ogico de Monterrey, Eugenio Garza Lag€ uera y Rufino Tamayo, Valle Oriente, 66269 San Pedro Garza Garc  ıa, Mexixo. His e-mail address is: miguelflores@itesm.mx. Sandra Medell  ın is a researcher in the Instituto para el Desarrollo Regional, Tecnol ogico de Monterrey, Mexico. Her e-mail address is: semedellin@itesm.mx. Amado Villarreal is a professor in the Tecnol ogico de Monterrey, Mexico. His e-mail address is: amado.villarreal@gmail.com Submitted January 2017; revised December 2017; accepted February 2018. V C 2018 Wiley Periodicals, Inc Growth and Change DOI: 10.1111/grow.12248 Vol. 00 No. 00 (Month 2018), pp. 00–00