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Trade, skill-biased technical change and wages in Mexican manufacturing

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  • Mauro Caselli

Abstract

This paper analyses and quantifies the effects of trade liberalisation and skill-biased technical change, both exogenous and trade-induced, on the skill premium and real wages of unskilled and skilled workers in theMexican manufacturing sector, using industry- and firm-level data for 1984-1990 from the Encuesta Industrial Anual. The novelty of the paper lies in its strategy for identifying causality, which uses differences across industries over time in the relative price of machinery and equipment in the US as an instrument for skill-biased technical change. The effect of trade-induced SBTC on wages, and especially on wage inequality, appears substantial. The regressions show that trade liberalisation and changes in the relative price of equipment in the US, which induce exogenous SBTC in Mexico, explain one quarter of the increase in relative skilled wages between 1984 and 1990. This rise in the skill premium due to SBTC and trade liberalisation mainly reflect a rise in real skilled wages, although with some specifications it was amplified by a fall in the real wages of unskilled workers.

Suggested Citation

  • Mauro Caselli, 2010. "Trade, skill-biased technical change and wages in Mexican manufacturing," CSAE Working Paper Series 2010-28, Centre for the Study of African Economies, University of Oxford.
    • Handle: RePEc:csa:wpaper:2010-28
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    References listed on IDEAS

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    1. Gallego, Francisco A., 2012. "Skill Premium in Chile: Studying Skill Upgrading in the South," World Development, Elsevier, vol. 40(3), pages 594-609.
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    12. repec:ilo:ilowps:365055 is not listed on IDEAS
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    Cited by:

    1. Andrea Waddle, 2021. "Trade, Technological Change, And Wage Inequality: The Case Of Mexico," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 62(1), pages 243-276, February.
    2. Pi, Jiancai & Zhang, Pengqing, 2018. "Skill-biased technological change and wage inequality in developing countries," International Review of Economics & Finance, Elsevier, vol. 56(C), pages 347-362.
    3. Bhalotra, Sonia & Fernandez Sierra, Manuel, 2018. "The distribution of the gender wage gap," ISER Working Paper Series 2018-10, Institute for Social and Economic Research.
    4. Jun Wang & Chengbo Wang & Xuan Wan, 2021. "Trade Liberalization, Energy‐Saving Technological Change And Energy Intensity: Some Empirical Evidence From China," Contemporary Economic Policy, Western Economic Association International, vol. 39(2), pages 365-376, April.
    5. Nicola Gagliardi & Benoît Mahy & François Rycx, 2020. "Trade, GVCs, and wage inequality: Theoretical and empirical insights," Reflets et perspectives de la vie économique, De Boeck Université, vol. 0(2), pages 115-134.
    6. Furuta, Manabu, 2016. "Trade Liberalization and Wage Inequality in the Indian Manufacturing Sector," MPRA Paper 73709, University Library of Munich, Germany.
    7. Mauro Caselli, 2018. "Do all imports matter for productivity? Intermediate inputs vs capital goods," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 35(2), pages 285-311, August.
    8. Irene Iodice & Chiara Tomasi, 2015. "Skill upgrading, wage gap and international trade: firm-level evidence for Italian manufacturing firms," LEM Papers Series 2015/06, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    9. Banh, Thi Hang & Caselli, Mauro, 2022. "Foreign Competition, Skill Premium, and Product Quality: Impact of Chinese Competition on Mexican Plants," GLO Discussion Paper Series 1162, Global Labor Organization (GLO).
    10. Sonia A. Agudelo & Hector Sala, 2016. "Wage setting in the Colombian manufacturing industry," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 24(1), pages 99-134, January.
    11. Thanh-Tam Nguyen-Huu, 2021. "Do “inferior” jobs always suffer from a wage penalty? Evidence from temporary workers in Cambodia and Pakistan," Post-Print hal-04248181, HAL.
    12. Yoshimichi Murakami, 2021. "Trade liberalization and wage inequality: Evidence from Chile," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 30(3), pages 407-438, April.
    13. Bhalotra, Sonia R & Fernández, Manuel & Wang, Fan, 2022. "The distribution of the gender wage gap : An equilibrium model," CAGE Online Working Paper Series 614, Competitive Advantage in the Global Economy (CAGE).
    14. Li, Huijuan & Cai, Weihong & Li, Wenxiu, 2021. "Does global value chains participation improve skill premium? Mediating role of skill-biased technological change," Economic Modelling, Elsevier, vol. 99(C).

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    More about this item

    Keywords

    trade liberalisation; skill-biased technical change; wage inequality; real wages; Mexico; manufacturing;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General

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