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Unemployment and Salary Formation in the Mexican Manufacturing Industry: A Dynamic Panel Analysis


  • Sara G. Castellanos

    () (Economista principal, Servicio de Estudios Económicos de BBVA Bancomer. México, D.F.)


In this article we study the relationship between wages, unemployment and labor productivity in Mexico’s manufacturing sector. We use the data of Monthly Industrial Survey, produced by the National Institute of Statistics (INEGI), to estimate a model with the generalized method of moments for dynamic panel data of Arellano and Bond (1991). This method exploits the cross time and cross section variability of the industrial sector data, and yields consistent and efficient estimators. Results suggest that unemployment slows down wage increases, while labor productivity accelerates them. In both cases, the effect is statistically significant.

Suggested Citation

  • Sara G. Castellanos, 2010. "Unemployment and Salary Formation in the Mexican Manufacturing Industry: A Dynamic Panel Analysis," Economía Mexicana NUEVA ÉPOCA, , vol. 0(1), pages 171-198, January-J.
  • Handle: RePEc:emc:ecomex:v:19:y:2010:i:1:p:171-198

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    nominal wages; unemployment; Mexico.;

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials


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