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Wage Inequality in Post-Reform Mexico

Author

Listed:
  • Jim Airola

    (Naval Postgraduate School)

  • Chinhui Juhn

    (University of Houston)

Abstract

Using the ENIGH covering 1984-2002, we analyze wages and employment in Mexico after trade liberalization and domestic reforms. We find that wage inequality and returns to post-secondary schooling increased rapidly during 1984-1994 but stabilized since that period. The end of inequality growth was due to a severe macroeconomic crisis which adversely impacted the better educated, an increase in education levels at the end of the 1990s, and a slowdown in skill demand in the latter half of the 1990s. Between industry shifts, consistent with tradebased explanations, account for a part of the increase in skill demand during 1984-1994, but these types of movements actually reduced thedemand for skill in the latter part of the 1990s. The equalizing impact of trade was offset by within-industry demand shifts which continued to favor more educated workers. The Mexican experience in the 1990s suggests that market-oriented reforms have a sharp initial impact on inequality which dissipates over time but further that opening the economy to trade, foreign capital, and global markets does lead to a more long-run increase in the demand for skill.

Suggested Citation

  • 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.
  • Handle: RePEc:jid:journl:y:2008:v:17:i:1:p:110-134
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    More about this item

    Keywords

    reform; Mexico; wage structure; skill-biased technological change; ENIGH;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions

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