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What Has Happened to Wages in Mexico since NAFTA?

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  • Gordon H. Hanson

Abstract

In this paper, I examine the impacts of trade and investment liberalization on the wage structure of Mexico. Part one of the paper surveys recent literature on the labor-market consequences of Mexico's economic reforms in the 1980?s. Mexico's policy reforms appear to have raised the demand for skill in the country, reduced rents in industries that prior to reform paid their workers high wages, and raised the premium paid to workers in states along the U.S. border. These changes have resulted in an increase in wage dispersion in the country. Part two of the paper examines changes in Mexico's wage structure during the 1990's. In the last decade, Mexico has experienced rising returns to skill, which mirror closely wage movements in the United States. There is, however, little evidence of wage convergence between the two countries. Regional wage differentials in Mexico have widened and appear to be explained largely by variation in regional access to foreign trade and investment and in regional opportunities for migration to the United States. I discuss implications of Mexico's experience for the rest of Latin America in the event a Free Trade Agreement of the Americas is enacted.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 9563.

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Date of creation: Mar 2003
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Publication status: published as Estevadeordal, Antoni, Dani Rodrik, Alan Taylor, and Andres Velasco (eds.) Integrating the Americas: FTAA and Beyond. Cambridge, MA: Harvard University Press, 2004.
Handle: RePEc:nbr:nberwo:9563

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  1. Hanson, Gordon H, 1996. "Localization Economies, Vertical Organization, and Trade," American Economic Review, American Economic Association, American Economic Association, vol. 86(5), pages 1266-78, December.
  2. Hanson, Gordon H, 1997. "Increasing Returns, Trade and the Regional Structure of Wages," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 107(440), pages 113-33, January.
  3. Zadia M. Feliciano, 2001. "Workers and trade liberalization: The impact of trade reforms in Mexico on wages and employment," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 55(1), pages 95-115, October.
  4. Christopher Woodruff, 1999. "Inflation stabilization and the vanishing size-wage effect," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 53(1), pages 103-122, October.
  5. Hanson, G.H. & Harrison, A., 1995. "Trade, Technology and Wage Inequality," Papers 95-20, Columbia - Graduate School of Business.
  6. Robertson, Raymond, 2004. "Relative prices and wage inequality: evidence from Mexico," Journal of International Economics, Elsevier, Elsevier, vol. 64(2), pages 387-409, December.
  7. Raymond Robertson, 2000. "Wage Shocks and North American Labor-Market Integration," American Economic Review, American Economic Association, American Economic Association, vol. 90(4), pages 742-764, September.
  8. Robert C. Feenstra & Gordon H. Hanson, 1995. "Foreign Direct Investment and Relative Wages: Evidence from Mexico's Maquiladoras," NBER Working Papers 5122, National Bureau of Economic Research, Inc.
  9. Brian Aitken & Ann Harrison & Robert E. Lipsey, 1995. "Wages and Foreign Ownership: A Comparative Study of Mexico, Venezuela and the United States," NBER Working Papers 5102, National Bureau of Economic Research, Inc.
  10. Edward E. Leamer, 1992. "Wage Effects of A U.S. - Mexican Free Trade Agreement," NBER Working Papers 3991, National Bureau of Economic Research, Inc.
  11. Cragg, Michael Ian & Epelbaum, Mario, 1996. "Why has wage dispersion grown in Mexico? Is it the incidence of reforms or the growing demand for skills?," Journal of Development Economics, Elsevier, Elsevier, vol. 51(1), pages 99-116, October.
  12. Zadia M. Feliciano, 1998. "Does the Minimum Wage Affect Employment in Mexico?," Eastern Economic Journal, Eastern Economic Association, vol. 24(2), pages 165-180, Spring.
  13. Revenga, Ana, 1997. "Employment and Wage Effects of Trade Liberalization: The Case of Mexican Manufacturing," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 15(3), pages S20-43, July.
  14. Pinelopi K. Goldberg & Nina Pavcnik, 2001. "Trade Protection and Wages: Evidence from the Colombian Trade Reforms," NBER Working Papers 8575, National Bureau of Economic Research, Inc.
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