Sham Unions: Evidence from the USMCA’s Rapid Response Mechanism

With Raquel Badillo and Lorenzo Lagos

We examine the USMCA’s Rapid Response Mechanism (RRM) and its impact on sham unions in Mexico, which have undermined worker representation. The RRM enhances union freedom and addresses violations swiftly. Results indicate a 5.1% wage increase but a 10.7% decrease in employment at affected firms, as companies outsource and reduce blue-collar jobs, particularly affecting younger workers. Non-targeted firms benefit from increased market share.