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Globalization and Wage Convergence: Mexico and the United States

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  • Davide Gandolfi

    (Macalester College)

  • Timothy Halliday

    ()
    (Department of Economics, University of Hawaii at Manoa)

  • Raymond Robertson

    (Macalester College)

Abstract

Neoclassical trade theory suggests that factor price convergence should follow increased commercial integration. Rising commercial integration and foreign direct investment followed the 1994 North American Free Trade Agreement between the United States and Mexico. This paper evaluates the degree of wage convergence between Mexico and the United States between 1988 and 2011. We apply a synthetic panel approach to employment survey data and a more descriptive approach to Census data from Mexico and the US. First, we find no evidence of long-run wage convergence among cohorts characterized by low migration propensities although this was, in part, due to large macroeconomic shocks. On the other hand, we do find some evidence of convergence for workers with high migration propensities. Finally, we find evidence of convergence in the border of Mexico vis-Ã -vis its interior in the 1990s but this was reversed in the 2000s.

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File URL: http://www.economics.hawaii.edu/research/workingpapers/WP_14-5.pdf
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Bibliographic Info

Paper provided by University of Hawaii at Manoa, Department of Economics in its series Working Papers with number 201405.

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Length: 50 pages
Date of creation: Mar 2014
Date of revision:
Handle: RePEc:hai:wpaper:201405

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Keywords: Migration; Labor-market Integration; Factor Price Equalization;

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  1. Gordon H. Hanson, 1994. "Localization Economies, Vertical Organization and Trade," NBER Working Papers 4744, National Bureau of Economic Research, Inc.
  2. Raymond Robertson, 2000. "Wage Shocks and North American Labor-Market Integration," American Economic Review, American Economic Association, vol. 90(4), pages 742-764, September.
  3. Deaton, Angus, 1985. "Panel data from time series of cross-sections," Journal of Econometrics, Elsevier, vol. 30(1-2), pages 109-126.
  4. Hendry, David F. & Ericsson, Neil R., 1991. "Modeling the demand for narrow money in the United Kingdom and the United States," European Economic Review, Elsevier, vol. 35(4), pages 833-881, May.
  5. Peter K. Schott, 2003. "One Size Fits All? Heckscher-Ohlin Specialization in Global Production," American Economic Review, American Economic Association, vol. 93(3), pages 686-708, June.
  6. Daniel Chiquiar & Gordon H. Hanson, 2002. "International Migration, Self-Selection, and the Distribution of Wages: Evidence from Mexico and the United States," NBER Working Papers 9242, National Bureau of Economic Research, Inc.
  7. David Card, 1996. "Immigrant Inflows, Native Outflows, and the Local Labor Market Impacts of Higher Immigration," Working Papers 747, Princeton University, Department of Economics, Industrial Relations Section..
  8. Robertson, Raymond & Kumar, Anil & Dutkowsky, Donald H., 2009. "Purchasing Power Parity and aggregation bias for a developing country: The case of Mexico," Journal of Development Economics, Elsevier, vol. 90(2), pages 237-243, November.
  9. Pinelopi Koujianou Goldberg & Nina Pavcnik, 2007. "Distributional Effects of Globalization in Developing Countries," NBER Working Papers 12885, National Bureau of Economic Research, Inc.
  10. 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.
  11. Mishra, Prachi, 2007. "Emigration and wages in source countries: Evidence from Mexico," Journal of Development Economics, Elsevier, vol. 82(1), pages 180-199, January.
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