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Trade, skill-biased technical change and wages in Mexican manufacturing

  • Mauro Caselli

This article looks at the relative importance of competing stories, particularly trade liberalization and skill-biased technical change, to explain changes in the skill premium and the real wages of unskilled and skilled workers in Mexican manufacturing using plant-level data. The channel through which technical change is observed is changes in the domestic price of machinery and equipment due to the availability of new and cheaper machines. The analysis also looks at trade-induced skill-biased technical change by taking into account changes in the price of machinery and equipment caused by changes in the tariff rate specific to machinery and equipment. Instrumental variables, including the price of machinery and equipment in the United States, are used to determine causality between the above effects and wages. Thus, the article provides evidence for some recent findings in the literature that link trade liberalization, skill-biased technical change occurring through technology embodied in machines and increases in the skill premium.

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File URL: http://hdl.handle.net/10.1080/00036846.2013.848033
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Article provided by Taylor & Francis Journals in its journal Applied Economics.

Volume (Year): 46 (2014)
Issue (Month): 3 (January)
Pages: 336-348

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Handle: RePEc:taf:applec:v:46:y:2014:i:3:p:336-348
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  16. Ten Kate, Adriaan, 1992. "Trade liberalization and economic stabilization in Mexico: Lessons of experience," World Development, Elsevier, vol. 20(5), pages 659-672, May.
  17. Ariel Burstein & Jonathan Vogel, 2010. "Globalization, Technology, and the Skill Premium: A Quantitative Analysis," NBER Working Papers 16459, National Bureau of Economic Research, Inc.
  18. Alberto Behar, 2009. "Directed technical change, the elasticity of substitution and wage inequality in developing countries," Economics Series Working Papers 467, University of Oxford, Department of Economics.
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