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The Effect of Trade and FDI on Inter-industry Wage Differentials: The Case of Mexico

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  • López Noria Gabriela

Abstract

Taking 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.

Suggested Citation

  • López Noria Gabriela, 2011. "The Effect of Trade and FDI on Inter-industry Wage Differentials: The Case of Mexico," Working Papers 2011-10, Banco de México.
    • Handle: RePEc:bdm:wpaper:2011-10
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    More about this item

    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 - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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