IDEAS home Printed from https://ideas.repec.org/a/eee/wdevel/v40y2012i9p1908-1920.html
   My bibliography  Save this article

Economic Liberalization and Rising College Premiums in Mexico: A Reinterpretation

Author

Listed:
  • Mehta, Aashish
  • Mohr, Belinda Acuña

Abstract

Mexico’s college premium rose in the 1990s. Studies employing structural decomposition analyses treat the college premium as the relative price of “skilled” to “unskilled” workers. They find that reallocations of labor across industries and occupations cannot account for rising college premiums, and often attribute them to widely observed trade-induced increases in skills demand within the manufacturing sector. In contrast, using a reduced-form decomposition that moves beyond a binary definition of skill and allows for inter-occupation wage differentials, we show that employment shifts across occupations and industries can account for the increase in the college premium. We link the rising premium, and differences in its trajectory by gender and cohort, to the growth of specific professions that produce services, not manufactured goods.

Suggested Citation

  • Mehta, Aashish & Mohr, Belinda Acuña, 2012. "Economic Liberalization and Rising College Premiums in Mexico: A Reinterpretation," World Development, Elsevier, vol. 40(9), pages 1908-1920.
    • Handle: RePEc:eee:wdevel:v:40:y:2012:i:9:p:1908-1920
    DOI: 10.1016/j.worlddev.2012.04.007
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0305750X1200068X
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.worlddev.2012.04.007?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Lawrence F. Katz & Kevin M. Murphy, 1992. "Changes in Relative Wages, 1963–1987: Supply and Demand Factors," The Quarterly Journal of Economics, Oxford University Press, vol. 107(1), pages 35-78.
    2. Abhijit Banerjee & Thomas Piketty, 2005. "Top Indian Incomes, 1922-2000," The World Bank Economic Review, World Bank, vol. 19(1), pages 1-20.
    3. Sanchez-Paramo, Carolina & Schady, Norbert, 2003. "Off and running? Technology, trade and the rising demand for skilled workers in Latin America," Policy Research Working Paper Series 3015, The World Bank.
    4. Katz, Lawrence F. & Autor, David H., 1999. "Changes in the wage structure and earnings inequality," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 26, pages 1463-1555, Elsevier.
    5. Esquivel, Gerardo & Rodriguez-Lopez, Jose Antonio, 2003. "Technology, trade, and wage inequality in Mexico before and after NAFTA," Journal of Development Economics, Elsevier, vol. 72(2), pages 543-565, December.
    6. Edward M. Graham & Erika Wada, 2000. "Domestic Reform, Trade and Investment Liberalisation, Financial Crisis, and Foreign Direct Investment into Mexico," The World Economy, Wiley Blackwell, vol. 23(6), pages 777-797, June.
    7. Revenga, Ana, 1997. "Employment and Wage Effects of Trade Liberalization: The Case of Mexican Manufacturing," Journal of Labor Economics, University of Chicago Press, vol. 15(3), pages 20-43, July.
    8. Feenstra, Robert C. & Hanson, Gordon H., 1997. "Foreign direct investment and relative wages: Evidence from Mexico's maquiladoras," Journal of International Economics, Elsevier, vol. 42(3-4), pages 371-393, May.
    9. Murphy, Kevin M & Welch, Finis, 1993. "Occupational Change and the Demand for Skill, 1940-1990," American Economic Review, American Economic Association, vol. 83(2), pages 122-136, May.
    10. Andre Varella Mollick, 2008. "The Rise of the Skill Premium in Mexican Maquiladoras," Journal of Development Studies, Taylor & Francis Journals, vol. 44(9), pages 1382-1404.
    11. Harrison, Ann & Hanson, Gordon, 1999. "Who gains from trade reform? Some remaining puzzles," Journal of Development Economics, Elsevier, vol. 59(1), pages 125-154, June.
    12. Chiquiar, Daniel, 2008. "Globalization, regional wage differentials and the Stolper-Samuelson Theorem: Evidence from Mexico," Journal of International Economics, Elsevier, vol. 74(1), pages 70-93, January.
    13. Raymond Robertson, 2000. "Trade Liberalisation and Wage Inequality: Lessons from the Mexican Experience," The World Economy, Wiley Blackwell, vol. 23(6), pages 827-849, June.
    14. Gordon H. Hanson & Ann Harrison, 2022. "Trade Liberalization And Wage Inequality In Mexico," World Scientific Book Chapters, in: Globalization, Firms, and Workers, chapter 3, pages 43-60, World Scientific Publishing Co. Pte. Ltd..
    15. Eric A. Verhoogen, 2008. "Trade, Quality Upgrading, and Wage Inequality in the Mexican Manufacturing Sector," The Quarterly Journal of Economics, Oxford University Press, vol. 123(2), pages 489-530.
    16. Eli Berman & John Bound & Zvi Griliches, 1994. "Changes in the Demand for Skilled Labor within U. S. Manufacturing: Evidence from the Annual Survey of Manufactures," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 109(2), pages 367-397.
    17. Jim Airola & Chinhui Juhn, 2008. "Wage Inequality in Post-Reform Mexico," Journal of Income Distribution, Ad libros publications inc., vol. 17(1), pages 110-134, March.
    18. Anne O. Krueger, 2000. "NAFTA's Effects: A Preliminary Assessment," The World Economy, Wiley Blackwell, vol. 23(6), pages 761-775, June.
    19. Kijima, Yoko, 2006. "Why did wage inequality increase? Evidence from urban India 1983-99," Journal of Development Economics, Elsevier, vol. 81(1), pages 97-117, October.
    20. Gordon H. Hanson, 2003. "What Has Happened to Wages in Mexico since NAFTA?," NBER Working Papers 9563, National Bureau of Economic Research, Inc.
    21. North, Douglass C., 1989. "Institutions and economic growth: An historical introduction," World Development, Elsevier, vol. 17(9), pages 1319-1332, September.
    22. Robert E. Lucas Jr., 1978. "On the Size Distribution of Business Firms," Bell Journal of Economics, The RAND Corporation, vol. 9(2), pages 508-523, Autumn.
    23. Richter, Kaspar, 2006. "Thailand's growth path : from recovery to prosperity," Policy Research Working Paper Series 3912, The World Bank.
    24. 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, vol. 51(1), pages 99-116, October.
    25. Mollick, André Varella, 2009. "Employment Responses of Skilled and Unskilled Workers at Mexican Maquiladoras: The Effects of External Factors," World Development, Elsevier, vol. 37(7), pages 1285-1296, July.
    26. Zadia M. Feliciano, 2001. "Workers and Trade Liberalization: The Impact of Trade Reforms in Mexico on Wages and Employment," ILR Review, Cornell University, ILR School, vol. 55(1), pages 95-115, October.
    27. Aashish Mehta & Hector Villarreal, 2008. "Why do diplomas pay? An expanded Mincerian framework applied to Mexico," Applied Economics, Taylor & Francis Journals, vol. 40(24), pages 3127-3144.
    28. Harrison, Margaret E., 1998. "Female physicians in Mexico: Migration and mobility in the lifecourse," Social Science & Medicine, Elsevier, vol. 47(4), pages 455-468, August.
    29. Pinelopi Koujianou Goldberg & Nina Pavcnik, 2007. "Distributional Effects of Globalization in Developing Countries," Journal of Economic Literature, American Economic Association, vol. 45(1), pages 39-82, March.
    30. Ten Kate, Adriaan, 1992. "Trade liberalization and economic stabilization in Mexico: Lessons of experience," World Development, Elsevier, vol. 20(5), pages 659-672, May.
    31. Gabriel Montes Rojas, 2006. "Skill premia in Mexico: demand and supply factors," Applied Economics Letters, Taylor & Francis Journals, vol. 13(14), pages 917-924.
    32. Robertson, Raymond, 2004. "Relative prices and wage inequality: evidence from Mexico," Journal of International Economics, Elsevier, vol. 64(2), pages 387-409, December.
    33. D. C. A. Curtis & K. S. R. Murthy, 1998. "Economic growth and restructuring: a test of unbalanced growth models - 1977-1992," Applied Economics Letters, Taylor & Francis Journals, vol. 5(12), pages 777-780.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Wang, Jun & Liao, Chengjuan & Wan, Xuan & Song, Hui, 2021. "Skill Formation, Employment Discrimination, and Wage Inequality: Evidence from the People’s Republic of China," ADBI Working Papers 1283, Asian Development Bank Institute.
    2. Aashish Mehta & Jesus Felipe & Pilipinas Quising & Shiela Camingue, 2013. "Where have All the Educated Workers Gone? Services and Wage Inequality in Three Asian Economies," Metroeconomica, Wiley Blackwell, vol. 64(3), pages 466-497, July.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Pinelopi Koujianou Goldberg & Nina Pavcnik, 2007. "Distributional Effects of Globalization in Developing Countries," Journal of Economic Literature, American Economic Association, vol. 45(1), pages 39-82, March.
    2. André Varella Mollick & Jorge Ibarra-Salazar, 2013. "Productivity Effects on the Wage Premium of Mexican Maquiladoras," Economic Development Quarterly, , vol. 27(3), pages 208-220, August.
    3. 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.
    4. Raymundo M. Campos-Vazquez & Nora Lustig, 2017. "Labour income inequality in Mexico: Puzzles solved and unsolved," Working Papers 1719, Tulane University, Department of Economics.
    5. Bosch, Mariano & Manacorda, Marco, 2008. "Minimum wages and earnings inequality in urban Mexico. Revisiting the evidence," LSE Research Online Documents on Economics 19561, London School of Economics and Political Science, LSE Library.
    6. Raymundo M. Campos-Vazquez & Nora Lustig, 2017. "Labour income inequality in Mexico: Puzzles solved and unsolved," Working Papers 1719, Tulane University, Department of Economics.
    7. Andrew B. Bernard & Raymond Robertson & Peter K. Schott, 2010. "Is Mexico a Lumpy Country?," Review of International Economics, Wiley Blackwell, vol. 18(5), pages 937-950, November.
    8. Raymundo M. Campos-Vázquez & Nora Lustig & John Scott, 2018. "Inequality in Mexico: Labour markets and fiscal redistribution 1989-2014," WIDER Working Paper Series wp-2018-188, World Institute for Development Economic Research (UNU-WIDER).
    9. Raymundo Campos-Vázquez & Nora Lustig & John Scott, 2018. "Inequality in Mexico: Labour markets and fiscal redistribution 1989–2014," WIDER Working Paper Series 188, World Institute for Development Economic Research (UNU-WIDER).
    10. Mariano Bosch & Marco Manacorda, 2010. "Minimum Wages and Earnings Inequality in Urban Mexico," American Economic Journal: Applied Economics, American Economic Association, vol. 2(4), pages 128-149, October.
    11. Cardoso-Vargas, Carlos, 2015. "Potencial de mercado y desigualdad salarial, evidencia para México [Market potential and wage inequality, evidence for Mexico]," MPRA Paper 69696, University Library of Munich, Germany, revised 05 Nov 2015.
    12. Timothy Halliday & Daniel Lederman & Raymond Robertson, 2018. "Tracking wage inequality trends with prices and different trade models: evidence from Mexico," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 154(1), pages 47-73, February.
    13. Zouhair Mrabet, 2012. "The Impact of Trade Liberalization on Labor Market of Developing Countries: What can Literature tell us?," Journal of Economics and Behavioral Studies, AMH International, vol. 4(6), pages 307-318.
    14. Jim Airola & Chinhui Juhn, 2008. "Wage Inequality in Post-Reform Mexico," Journal of Income Distribution, Ad libros publications inc., vol. 17(1), pages 110-134, March.
    15. Han, Jun & Liu, Runjuan & Zhang, Junsen, 2012. "Globalization and wage inequality: Evidence from urban China," Journal of International Economics, Elsevier, vol. 87(2), pages 288-297.
    16. Kris James Mitchener & Se Yan, 2014. "Globalization, Trade, And Wages: What Does History Tell Us About China?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 55(1), pages 131-168, February.
    17. Pinelopi K. Goldberg & Nina Pavcnik, 2004. "Trade, Inequality, and Poverty: What Do We Know? Evidence from Recent Trade Liberalization Episodes in Developing Countries," NBER Working Papers 10593, National Bureau of Economic Research, Inc.
    18. Ayal Kimhi, 2004. "Growth, Inequality and Labor Markets in LDCs: A Survey," CESifo Working Paper Series 1281, CESifo.
    19. Yoshimichi Murakami, 2018. "Globalization and Income Inequality in Latin America: A Review of Theoretical Developments and Recent Evidence," Discussion Paper Series DP2018-16, Research Institute for Economics & Business Administration, Kobe University, revised Aug 2018.
    20. Cardoso-Vargas, Carlos, 2015. "Potencial de mercado y desigualdad salarial, evidencia para México [Market potential and wage inequality, evidence for Mexico]," MPRA Paper 68424, University Library of Munich, Germany, revised 05 Nov 2015.

    More about this item

    Keywords

    skill premium; employment composition; trade liberalization; services; Latin America; Mexico;
    All these keywords.

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:wdevel:v:40:y:2012:i:9:p:1908-1920. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/worlddev .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.