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Wage Inequality in Post-Reform Mexico

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  • Airola, Jim

    ()
    (Naval Postgraduate School)

  • Juhn, Chinhui

    ()
    (University of Houston)

Abstract

Using the Mexican Household Income and Expenditure Survey (ENIGH) covering 1984-2000 we analyze wages and employment in Mexico after trade liberalization and domestic reforms. We find that wage inequality and returns to post-secondary schooling increased rapidly during 1984-1994 but stabilized since that period. The end of inequality growth was due to a severe macroeconomic crisis which adversely impacted the better educated, an increase in education levels at the end of the 1990s, and a slowdown in skill demand in the latter half of the 1990s. Between-industry shifts, consistent with trade-based explanations, account for a part of the increase in skill demand during 1984-1994, but these types of movements actually reduced the demand for skill in the latter part of the 1990s. The equalizing impact of trade was offset by within-industry demand shifts which continued to favor more educated workers. The Mexican experience in the 1990s suggests that market-oriented reforms have a sharp initial impact on inequality which dissipates over time. However, the opening of the economy to trade, foreign capital, and global markets also leads to a more long-run increase in the demand for skill.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1525.

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Length: 50 pages
Date of creation: Mar 2005
Date of revision:
Handle: RePEc:iza:izadps:dp1525

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Keywords: wage inequality; reforms; skill demand;

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