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Income Divergence between Mexican States in the 1990s: The Role of Skill Premium

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  • ERNESTO AGUAYO-TELLEZ

Abstract

During the period 1940-1985 the variance of average incomes across Mexican states fell by 60 percent. Beginning in 1985, however, and coinciding with the adoption of trade liberalization policies and other market-oriented reforms, state incomes began to diverge. Using microdata from the 1990 and 2000 Mexican Population Censuses, this study decomposes the recent divergence into components due to economy-wide changes in skill prices and components due to state-specific changes in the composition of workers. The study finds that the rise in the education premium hindered the progress of poor states and raised the variance of average state wages and labor earnings. However, educational attainment mostly compensated for this income-widening effect. State-level regressions reveal that the initial level of education, size of the agricultural sector, and distance from the U.S. border were important factors, while public infrastructure was not. While the border states clearly benefited from increased trade and opening of the economy, I find no evidence that skill demand or the immigration of highly educated workers particularly favored these states. Copyright 2006 Blackwell Publishing.

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Bibliographic Info

Article provided by Gatton College of Business and Economics, University of Kentucky in its journal Growth and Change.

Volume (Year): 37 (2006)
Issue (Month): 2 ()
Pages: 255-277

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Handle: RePEc:bla:growch:v:37:y:2006:i:2:p:255-277

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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0017-4815

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Cited by:
  1. Escobar Gamboa, Octavio Romano, 2009. "IDE entrants, exportations et productivité manufacturière : les différentes performances des régions mexicaines," Economics Thesis from University Paris Dauphine, Paris Dauphine University, number 123456789/3850 edited by Guillochon, Bernard.
  2. Andersson, Fredrik N.G. & Edgerton, David L. & Opper, Sonja, 2013. "A Matter of Time: Revisiting Growth Convergence in China," World Development, Elsevier, vol. 45(C), pages 239-251.

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