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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. Copyright © 2008 The Author.

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  • 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
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    References listed on IDEAS

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    1. Romain Wacziarg & Karen Horn Welch, 2008. "Trade Liberalization and Growth: New Evidence," World Bank Economic Review, World Bank Group, vol. 22(2), pages 187-231, June.
    2. Jim Airola & Chinhui Juhn, 2008. "Wage Inequality in Post-Reform Mexico," Journal of Income Distribution, Journal of Income Distribution, vol. 17(1), pages 110-134, March.
    3. Utsav Kumar & Prachi Mishra, 2008. "Trade Liberalization and Wage Inequality: Evidence from India," Review of Development Economics, Wiley Blackwell, vol. 12(2), pages 291-311, May.
    4. Meng,Xin, 2009. "Labour Market Reform in China," Cambridge Books, Cambridge University Press, number 9780521121118, April.
    5. Donald R. Davis, 1996. "Trade Liberalization and Income Distribution," NBER Working Papers 5693, National Bureau of Economic Research, Inc.
    6. Edward E. Leamer, 1996. "In Search of Stolper-Samuelson Effects on U.S. Wages," NBER Working Papers 5427, National Bureau of Economic Research, Inc.
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    Cited by:

    1. 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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