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Trade, Technology, and Wage Inequality

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  • Gordon H. Hanson
  • Ann Harrison

Abstract

In Mexico during the 1980s, the wages of more-educated, more- experienced workers rose relative to those of less-educated, less- experienced workers. We assess the extent to which the increase in the skilled-unskilled wage gap was associated with Mexico's recent trade reform. In particular, we examine whether trade reform has shifted employment towards industries that are relatively intensive in the use of skilled labor (Stolper-Samuelson-type effects). The results suggest that the rising wage gap is associated with changes internal to industries and even internal to plants that cannot be explained by Stolper-Samuelson-type effects. We also find that other characteristics associated with globalization -- such as foreign investment and export orientation -- matter. Exporting firms and joint ventures pay higher wages to skilled workers and demand more skilled labor than other firms.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 5110.

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Date of creation: May 1995
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Publication status: published as Industrial and Labor Relations Review, Vol. 52 (1999): 271-288.
Handle: RePEc:nbr:nberwo:5110

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  1. Feenstra, Robert C. & Hanson, Gordon H., 1997. "Foreign direct investment and relative wages: Evidence from Mexico's maquiladoras," Journal of International Economics, Elsevier, vol. 42(3-4), pages 371-393, May.
  2. Bernard, Andrew B. & Jensen, J. Bradford, 1997. "Exporters, skill upgrading, and the wage gap," Journal of International Economics, Elsevier, vol. 42(1-2), pages 3-31, February.
  3. Steven J. Davis, 1992. "Cross-Country Patterns of Change in Relative Wages," NBER Working Papers 4085, National Bureau of Economic Research, Inc.
  4. George J. Borjas & Valerie A. Ramey, 1993. "Foreign Competition, Market Power and Wage Inequality: Theory and Evidence," NBER Working Papers 4556, National Bureau of Economic Research, Inc.
  5. Ethier, Wilfred J., 1984. "Higher dimensional issues in trade theory," Handbook of International Economics, in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 1, chapter 3, pages 131-184 Elsevier.
  6. Michael Ian Cragg & Mario Epelbaum, 1995. "The Premium for Skills in LDCs: Evidence from Mexico," Working Papers 9505, Centro de Investigacion Economica, ITAM.
  7. Edward E. Leamer, 1992. "Wage Effects of A U.S. - Mexican Free Trade Agreement," NBER Working Papers 3991, National Bureau of Economic Research, Inc.
  8. Steve J. Davis & John Haltiwanger, 1991. "Wage Dispersion Between and Within U.S. Manufacturing Plants, 1963-1986," NBER Working Papers 3722, National Bureau of Economic Research, Inc.
  9. Robert E. Lipsey, 1994. "Foreign-Owned Firms and U.S. Wages," NBER Working Papers 4927, National Bureau of Economic Research, Inc.
  10. Edward E. Leamer, 1994. "Trade, Wages and Revolving Door Ideas," NBER Working Papers 4716, National Bureau of Economic Research, Inc.
  11. Juhn, Chinhui & Murphy, Kevin M & Pierce, Brooks, 1993. "Wage Inequality and the Rise in Returns to Skill," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 410-42, June.
  12. Doms, Mark & Dunne, Timothy & Troske, Kenneth R, 1997. "Workers, Wages, and Technology," The Quarterly Journal of Economics, MIT Press, vol. 112(1), pages 253-90, February.
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