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The impact of trade margins on the skill premium: Evidence from Mexico

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  • Atolia, Manoj
  • Kurokawa, Yoshinori

Abstract

This paper formulates a static applied general equilibrium model of a small open economy and then calibrates it to the Mexican input–output matrix for 1987. We use the calibrated model to quantify how much of the dramatic rise in the skill premium over the period 1987–1994, following the liberalization of the trade policy in Mexico, can be accounted for by the change in the extensive margin of trade or trade variety. Our numerical experiments show that the increase in the extensive margin of Mexican manufactured trade with the U.S. can account for up to approximately 12 percent of the actual increase in skill premium in Mexico from 1987 to 1994.

Suggested Citation

  • Atolia, Manoj & Kurokawa, Yoshinori, 2016. "The impact of trade margins on the skill premium: Evidence from Mexico," Journal of Policy Modeling, Elsevier, vol. 38(5), pages 895-915.
  • Handle: RePEc:eee:jpolmo:v:38:y:2016:i:5:p:895-915
    DOI: 10.1016/j.jpolmod.2016.03.007
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    Cited by:

    1. Andrea Waddle, 2021. "Trade, Technological Change, And Wage Inequality: The Case Of Mexico," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 62(1), pages 243-276, February.
    2. Kozo Kiyota & Yoshinori Kurokawa, 2019. "Intermediate Goods-Skill Complementarity," Keio-IES Discussion Paper Series 2019-013, Institute for Economics Studies, Keio University.
    3. Yang, Han, 2020. "Dynamic Trade, Education and Intergenerational Inequality," MPRA Paper 99976, University Library of Munich, Germany.
    4. Brock, Gregory & German-Soto, Vicente, 2017. "Regional industrial informality and efficiency in Mexico, 1990–2013," Journal of Policy Modeling, Elsevier, vol. 39(5), pages 928-941.
    5. Yang, Han, 2019. "Dynamic Trade, Education and Intergenerational Inequality," MPRA Paper 96054, University Library of Munich, Germany.

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    More about this item

    Keywords

    Trade liberalization; Trade variety; Skill premium; Applied general equilibrium; Mexico;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions

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