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Income Divergence between Mexican States in the 1990s: The Role of Skill Premium

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  • ERNESTO AGUAYO‐TELLEZ

Abstract

ABSTRACT During the period 1940–1985 the variance of average incomes across Mexican states fell by 60 percent. Beginning in 1985, however, and coinciding with the adoption of trade liberalization policies and other market‐oriented reforms, state incomes began to diverge. Using microdata from the 1990 and 2000 Mexican Population Censuses, this study decomposes the recent divergence into components due to economy‐wide changes in skill prices and components due to state‐specific changes in the composition of workers. The study finds that the rise in the education premium hindered the progress of poor states and raised the variance of average state wages and labor earnings. However, educational attainment mostly compensated for this income‐widening effect. State‐level regressions reveal that the initial level of education, size of the agricultural sector, and distance from the U.S. border were important factors, while public infrastructure was not. While the border states clearly benefited from increased trade and opening of the economy, I find no evidence that skill demand or the immigration of highly educated workers particularly favored these states.

Suggested Citation

  • Ernesto Aguayo‐Tellez, 2006. "Income Divergence between Mexican States in the 1990s: The Role of Skill Premium," Growth and Change, Wiley Blackwell, vol. 37(2), pages 255-277, June.
    • Handle: RePEc:bla:growch:v:37:y:2006:i:2:p:255-277
    DOI: 10.1111/j.1468-2257.2006.00317.x
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    References listed on IDEAS

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    1. Gordon H. Hanson, 2007. "Globalization, Labor Income, and Poverty in Mexico," NBER Chapters, in: Globalization and Poverty, pages 417-456, National Bureau of Economic Research, Inc.
    2. Mr. V. Hugo Juan-Ramon & Luis Rivera-Batiz, 1996. "Regional Growth in Mexico: 1970-1993," IMF Working Papers 1996/092, International Monetary Fund.
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    2. Andersson, Fredrik N.G. & Edgerton, David L. & Opper, Sonja, 2013. "A Matter of Time: Revisiting Growth Convergence in China," World Development, Elsevier, vol. 45(C), pages 239-251.

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