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The Returns to Wages for Mexican Workers in a Post NAFTA World: Has the Gap in Returns to Wages Grown Between Mexican Workers in the U.S. and their Domestic Counterparts?

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  • Hanig, Ross
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    Abstract

    I test to see if the returns to wages for Mexican workers have changed in the Pre- and Post-NAFTA periods using data from the Mexican Migration Project using a pseudo panel analysis framework. The results here suggest that the returns to wages for workers in Mexico have declined significantly in the Post-NAFTA period. However, due to severe measurement error in the data on wages earned in Mexico, and consequently insufficient data to provide suitable cohort sizes, the results here should be viewed as suggestive rather than inferential. I present several tables at the end of the paper with similar regression results from the INEGI data set which do not suffer these problems in measurement error and will form the basis for a significantly updated draft of this paper to be presented at the AAEA conference. The INEGI results suggest the workers in Mexico may actually have not been made significantly worse off from NAFTA. However, the coefficient for workers in the agricultural sector declines, suggesting this sector may have incurred significant losses in wage-returns. These latter results appear consistent with the other work finding that at best, NAFTA may have had an insignificant impact on Mexican wages. The updated version of this paper will present cross-sectional as well as pseudo-panel findings with cohorts grouped by five-year birth spans, gender, and educational attainment to better account for the generational effects and endogeneity with fixed effects.

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    File URL: http://purl.umn.edu/21385
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    Bibliographic Info

    Paper provided by American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association) in its series 2006 Annual meeting, July 23-26, Long Beach, CA with number 21385.

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    Date of creation: 2006
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    Handle: RePEc:ags:aaea06:21385

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    Keywords: Labor and Human Capital;

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    1. Kaivan Munshi & Mark Rosenzweig, 2009. "Why is Mobility in India so Low? Social Insurance, Inequality, and Growth," NBER Working Papers 14850, National Bureau of Economic Research, Inc.
    2. Robertson, Raymond, 2004. "Relative prices and wage inequality: evidence from Mexico," Journal of International Economics, Elsevier, vol. 64(2), pages 387-409, December.
    3. Raymond Robertson, 2000. "Wage Shocks and North American Labor-Market Integration," American Economic Review, American Economic Association, vol. 90(4), pages 742-764, September.
    4. David J. Mckenzie, 2001. "Estimation of AR(1) models with unequally spaced pseudo-panels," Econometrics Journal, Royal Economic Society, vol. 4(1), pages 40.
    5. Cragg, Michael Ian & Epelbaum, Mario, 1996. "Why has wage dispersion grown in Mexico? Is it the incidence of reforms or the growing demand for skills?," Journal of Development Economics, Elsevier, vol. 51(1), pages 99-116, October.
    6. Thomas, D. & Strauss, J., 1997. "Health and Wages: Evidence on Men and Women in Urban Brazil," Papers 97-05, RAND - Reprint Series.
    7. Richard Blundell & Stephen Bond, 2000. "GMM Estimation with persistent panel data: an application to production functions," Econometric Reviews, Taylor & Francis Journals, vol. 19(3), pages 321-340.
    8. Verbeek, M. & Nijman, T., 1990. "Can Cohort Data Be Treated As Genuine Panel Data," Papers 9064, Tilburg - Center for Economic Research.
    9. Kaivan Munshi, 2003. "Networks In The Modern Economy: Mexican Migrants In The U.S. Labor Market," The Quarterly Journal of Economics, MIT Press, vol. 118(2), pages 549-599, May.
    10. Donald R. Davis, 1996. "Trade Liberalization and Income Distribution," NBER Working Papers 5693, National Bureau of Economic Research, Inc.
    11. Beaulieu, Eugene & Benarroch, Michael & Gaisford, James, 2004. "Trade barriers and wage inequality in a North-South model with technology-driven intra-industry trade," Journal of Development Economics, Elsevier, vol. 75(1), pages 113-136, October.
    12. Hanson, Gordon H, 1997. "Increasing Returns, Trade and the Regional Structure of Wages," Economic Journal, Royal Economic Society, vol. 107(440), pages 113-33, January.
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