The Effect of Trade and FDI on Inter-industry Wage Differentials: The Case of Mexico
AbstractTaking advantage of the liberalization process under NAFTA, this paper assesses the relative importance of the degree of trade openness and Foreign Direct Investment (FDI) in explaining inter-industry wage differentials for the case of Mexico. Using INEGI's National Survey of Urban Employment for the period 1994-2004, the empirical analysis is conducted on two stages. In the first stage, individual wages are regressed on worker characteristics, job and firm attributes, informality and a set of industry indicators. In the second stage, inter-industry wage differentials (derived from the coefficient estimates of the industry indicators) are regressed on trade and FDI variables. The main findings show that trade openness does not have a robust and statistically significant effect on inter-industry wage differentials, whereas for the case of FDI, a positive nonlinear relationship is found to exist.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Banco de México in its series Working Papers with number 2011-10.
Date of creation: Oct 2011
Date of revision:
Wage Inequality; Trade Liberalization; Foreign Direct Investment; NAFTA.;
Find related papers by JEL classification:
- F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
- G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
- J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
- M52 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-10-22 (All new papers)
- NEP-CIS-2011-10-22 (Confederation of Independent States)
- NEP-DEV-2011-10-22 (Development)
- NEP-INT-2011-10-22 (International Trade)
- NEP-LAB-2011-10-22 (Labour Economics)
- NEP-LMA-2011-10-22 (Labor Markets - Supply, Demand, & Wages)
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.:
- Lane, Julia I. & Salmon, Laurie A. & Spletzer, James R., 2007. "Establishment Wage Differentials," Working Papers 403, U.S. Bureau of Labor Statistics.
- Airola, Jim & Juhn, Chinhui, 2005.
"Wage Inequality in Post-Reform Mexico,"
IZA Discussion Papers
1525, Institute for the Study of Labor (IZA).
- Nina Pavcnik & Andreas Blom & Pinelopi Goldberg & Norbert Schady, 2004. "Trade Liberalization and Industry Wage Structure: Evidence from Brazil," World Bank Economic Review, World Bank Group, vol. 18(3), pages 319-344.
- Figini, Paolo & Görg, Holger, 2006.
"Does Foreign Direct Investment Affect Wage Inequality? An Empirical Investigation,"
IZA Discussion Papers
2336, Institute for the Study of Labor (IZA).
- Paolo Figini & Holger Go¨rg, 2011. "Does Foreign Direct Investment Affect Wage Inequality? An Empirical Investigation," The World Economy, Wiley Blackwell, vol. 34(9), pages 1455-1475, 09.
- Paolo Figini & Holger Görg, 2007. "Does foreign direct investment affect wage inequality? An empirical investigation," The Institute for International Integration Studies Discussion Paper Series iiisdp186, IIIS.
- Arellano, Manuel & Bover, Olympia, 1995.
"Another look at the instrumental variable estimation of error-components models,"
Journal of Econometrics,
Elsevier, vol. 68(1), pages 29-51, July.
- M Arellano & O Bover, 1990. "Another Look at the Instrumental Variable Estimation of Error-Components Models," CEP Discussion Papers dp0007, Centre for Economic Performance, LSE.
- Francesco Nucci & Alberto Franco Pozzolo, 2009.
"Exchange Rate, Employment and Hours: What Firm-Level Data Say,"
Mo.Fi.R. Working Papers
12, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
- Pozzolo, Alberto Franco & Nucci, Francesco, 2008. "Exchange Rate, Employment and Hours: What Firm-Level Data Say," Economics & Statistics Discussion Papers esdp08049, University of Molise, Dept. SEGeS.
- Robert S. Smith, 1979. "Compensating wage differentials and public policy: A review," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 32(3), pages 339-362, April.
- Orazio Attanasio & Pinelopi Goldberg & Nina Pavcnik, 2003.
"Trade Reforms and Wage Inequiality in Colombia,"
NBER Working Papers
9830, National Bureau of Economic Research, Inc.
- Gittleman, Maury & Wolff, Edward N, 1993. "International Comparisons of Inter-industry Wage Differentials," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 39(3), pages 295-312, September.
- Esquivel, Gerardo & Rodriguez-Lopez, Jose Antonio, 2003. "Technology, trade, and wage inequality in Mexico before and after NAFTA," Journal of Development Economics, Elsevier, vol. 72(2), pages 543-565, December.
- Erica L. Groshen, 1988. "Why do wages vary among employers?," Economic Review, Federal Reserve Bank of Cleveland, issue Q I, pages 19-38.
- Noel Gaston & Daniel Trefler, 1994. "Protection, trade, and wages: Evidence from U.S. manufacturing," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 47(4), pages 574-593, July.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dirección de Sistemas).
If references are entirely missing, you can add them using this form.