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FDI and the growing wage gap in Mexican municipalities

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  • Ibarra-Olivo, J. Eduardo
  • Rodríguez-Pose, Andrés

Abstract

Inward foreign direct investment (FDI) has generally been linked to higher wages, but evidence remains sparse on the overall effects of FDI on average wages, the wage gap between skilled and unskilled labour, and inter-industry heterogeneity. We address these issues for Mexican municipalities and industries for a period of increasing FDI and sectoral change that saw growing wage inequality. By combining two non-experimental techniques we find that FDI in Mexico was associated with higher wages, mostly for skilled workers—but also for unskilled ones—and a widening gap between them. Effects vary both between and within industries depending on location, and they either wax or wane when the initial or incremental effects are considered.

Suggested Citation

  • Ibarra-Olivo, J. Eduardo & Rodríguez-Pose, Andrés, 2022. "FDI and the growing wage gap in Mexican municipalities," LSE Research Online Documents on Economics 117636, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:117636
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    File URL: http://eprints.lse.ac.uk/117636/
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    More about this item

    Keywords

    foreign direct investment; industries; Mexico; municipalities; wage inequality;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General

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