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Trade Liberalization And Wage Inequality In Mexico

In: Globalization, Firms, and Workers

Author

Listed:
  • GORDON H. HANSON
  • ANN HARRISON

Abstract

During the 1980s in Mexico the wage gap between skilled and unskilled workers widened. The authors assess the extent to which this increased wage inequality was associated with Mexico’s sweeping trade reform in 1985. Examining data on 2,354 Mexican manufacturing plants for 1984-90 and Mexican Industrial Census data for 1965-88, they find that the reduction in tariff protection in 1985 disproportionately affected low-skilled industries. Goods from that sector, the authors suggest, may have fallen in price because of increased competition from economies with reserves of cheap unskilled labor larger than Mexico’s. The consequent increase in the relative price of skill-intensive goods could explain the increase in wage inequality.

Suggested Citation

  • 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..
    • Handle: RePEc:wsi:wschap:9789811239472_0003
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    JEL classification:

    • F02 - International Economics - - General - - - International Economic Order and Integration
    • F6 - International Economics - - Economic Impacts of Globalization
    • F63 - International Economics - - Economic Impacts of Globalization - - - Economic Development

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