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A Regional Analysis of the Impact of Trade and Foreign Direct Investment on Wages in Mexico, 1984–2000

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  • Jim Airola

Abstract

The conventional Heckscher–Ohlin model of trade predicts an equalizing effect of trade on wages in developing countries abundant in less‐skilled labor. Contrary to these predictions, skill premiums and skill demand increased in Mexico following trade liberalization. “New” trade theories have offered several channels through which trade can increase relative wages and demand for skilled workers. One such channel is foreign direct investment and outsourcing. Using the Mexican Household Income and Expenditure Survey (ENIGH) covering 1984–2000, the author examines the relationship between the demand for skill and maquiladora employment across regions and states. In contrast to previous studies based on manufacturing data for the 1980s, little evidence is found that growth in maquiladora employment is positively related to the increase in relative wages or wage‐bill share of more educated workers.

Suggested Citation

  • Jim Airola, 2008. "A Regional Analysis of the Impact of Trade and Foreign Direct Investment on Wages in Mexico, 1984–2000," Review of Development Economics, Wiley Blackwell, vol. 12(2), pages 276-290, May.
    • Handle: RePEc:bla:rdevec:v:12:y:2008:i:2:p:276-290
    DOI: 10.1111/j.1467-9361.2008.00428.x
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    References listed on IDEAS

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    1. J. Eduardo Ibarra‐Olivo & Andrés Rodríguez‐Pose, 2022. "FDI and the growing wage gap in Mexican municipalities," Papers in Regional Science, Wiley Blackwell, vol. 101(6), pages 1411-1439, December.
    2. Carlos Rodríguez-Castelán & Emmanuel Vazquez & Hernán Winkler, 2020. "Tracing the Local Impacts of Exports on Poverty and Inequality: The Case of Mexico," CEDLAS, Working Papers 0269, CEDLAS, Universidad Nacional de La Plata.
    3. Rodriguez Castelan, Carlos & Vazquez, Emmanuel & Winkler, Hernan, 2020. "Tracing the Local Impacts of Exports on Poverty and Inequality in Mexico," IZA Discussion Papers 13610, IZA Network @ LISER.
    4. Garduno-Rivera, Rafael & Baylis, Katherine R., 2012. "Effect of Tariff Liberalization on Mexico’s Income Distribution in the presence of Migration," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124740, Agricultural and Applied Economics Association.

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