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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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  1. Berman, Eli & Bound, John & Griliches, Zvi, 1994. "Changes in the Demand for Skilled Labor within U.S. Manufacturing: Evidence from the Annual Survey of Manufactures," The Quarterly Journal of Economics, MIT Press, vol. 109(2), pages 367-97, May.
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  8. Gustavo Gonzaga & Naércio Menezes Filho & Cristina Terra, 2006. "Trade Liberalization and the Evolution of Skill Earnings Differentials in Brazil," Development Working Papers 216, Centro Studi Luca d\'Agliano, University of Milano.
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  16. Mary Amiti & Jozef Konings, 2005. "Trade Liberalization, Intermediate Inputs, and Productivity; Evidence From Indonesia," IMF Working Papers 05/146, International Monetary Fund.
  17. Adriaan Ten Kate, 1989. "Notas Sobre La Apertura Comercial De Mexico, Experiencias Y Lecciones," ENSAYOS SOBRE POLÍTICA ECONÓMICA, BANCO DE LA REPÚBLICA - ESPE.
  18. Daron Acemoglu, 1999. "Patterns of Skill Premia," NBER Working Papers 7018, National Bureau of Economic Research, Inc.
  19. Eric Verhoogen, 2007. "Trade, quality upgrading and wage inequality in the Mexican manufacturing sector," Discussion Papers 0607-08, Columbia University, Department of Economics.
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