Foreign direct investment and relative wages: Evidence from Mexico's maquiladoras
AbstractIn this paper, we examine the increase in the relative wages of skilled workers in Mexico during the 1980s. We argue that rising wage inequality in Mexico is linked to capital inflows from abroad. The effect of these capital inflows, which correspond to an increase in outsourcing by multinationals from the United States and other Northern countries, is to shift production in Mexico towards relatively skill-intensive goods thereby increasing the relative demand for skilled labor. We study the impact of foreign direct investment (FDI) on the share of skilled labor in total wages in Mexico using state-level data on two-digit industries from the Industrial Census for the period 1975 to 1988. We measure the state- level growth in FDI using data on the regional activities of foreign- owned assembly plants. We find that growth in FDI is positively correlated with the relative demand for skilled labor. In the regions where FDI has been most concentrated, growth in FDI can account for over 50 percent of the increase in the skilled labor share of total wages that occurred during the late 1980s.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of International Economics.
Volume (Year): 42 (1997)
Issue (Month): 3-4 (May)
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Web page: http://www.elsevier.com/locate/inca/505552
Other versions of this item:
- Robert C. Feenstra & Gordon H. Hanson, 1995. "Foreign Direct Investment and Relative Wages: Evidence from Mexico's Maquiladoras," NBER Working Papers 5122, National Bureau of Economic Research, Inc.
- F14 - International Economics - - Trade - - - Empirical Studies of Trade
- F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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Department of Economics
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- Feenstra, R.C. & Hanson, G.H., 1995. "Foreign Investment, Outsourcing and Relative Wages," Papers 95-14, California Davis - Institute of Governmental Affairs.
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