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

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  • Mauro Caselli

Abstract

This paper analyses and quantifies the effects of trade liberalisation and skill-biased technical change, both exogenous and trade-induced, on the skill premium and real wages of unskilled and skilled workers in theMexican manufacturing sector, using industry- and firm-level data for 1984-1990 from the Encuesta Industrial Anual. The novelty of the paper lies in its strategy for identifying causality, which uses differences across industries over time in the relative price of machinery and equipment in the US as an instrument for skill-biased technical change. The effect of trade-induced SBTC on wages, and especially on wage inequality, appears substantial. The regressions show that trade liberalisation and changes in the relative price of equipment in the US, which induce exogenous SBTC in Mexico, explain one quarter of the increase in relative skilled wages between 1984 and 1990. This rise in the skill premium due to SBTC and trade liberalisation mainly reflect a rise in real skilled wages, although with some specifications it was amplified by a fall in the real wages of unskilled workers.

Suggested Citation

  • Mauro Caselli, 2010. "Trade, skill-biased technical change and wages in Mexican manufacturing," CSAE Working Paper Series 2010-28, Centre for the Study of African Economies, University of Oxford.
  • Handle: RePEc:csa:wpaper:2010-28
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    References listed on IDEAS

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    1. Amiti, Mary & Cameron, Lisa, 2012. "Trade Liberalization and the Wage Skill Premium: Evidence from Indonesia," Journal of International Economics, Elsevier, vol. 87(2), pages 277-287.
    2. Robbins, Donald J., 2003. "The impact of trade liberalization upon inequality in developing countries : a review of theory and evidence," ILO Working Papers 993650553402676, International Labour Organization.
    3. Donald Robbins, 2003. "The impact of trade liberalization upon inequality in developing countries - A review of theory and evidence-," DOCUMENTOS DE ECONOMÍA 003601, UNIVERSIDAD JAVERIANA - BOGOTÁ.
    4. Márton Csillag & Miklós Koren, 2011. "Machines and machinists: Capital-skill complementarity from an international trade perspective," CeFiG Working Papers 13, Center for Firms in the Global Economy, revised 25 Mar 2011.
    5. Gallego, Francisco A., 2012. "Skill Premium in Chile: Studying Skill Upgrading in the South," World Development, Elsevier, vol. 40(3), pages 594-609.
    6. Lucy Chennells & John Van Reenen, 1999. "Has technology hurt less skilled workers? A survey of the micro-econometric evidence," IFS Working Papers W99/27, Institute for Fiscal Studies.
    7. Andrew B. Bernard & Stephen J. Redding & Peter K. Schott, 2011. "Multiproduct Firms and Trade Liberalization," The Quarterly Journal of Economics, Oxford University Press, vol. 126(3), pages 1271-1318.
    8. Meschi, Elena & Taymaz, Erol & Vivarelli, Marco, 2011. "Trade, technology and skills: Evidence from Turkish microdata," Labour Economics, Elsevier, vol. 18(S1), pages 60-70.
    9. Petia Topalova & Amit Khandelwal, 2011. "Trade Liberalization and Firm Productivity: The Case of India," The Review of Economics and Statistics, MIT Press, vol. 93(3), pages 995-1009, August.
    10. Adriaan Ten Kate, 1989. "Notas Sobre La Apertura Comercial De Mexico, Experiencias Y Lecciones," ENSAYOS SOBRE POLÍTICA ECONÓMICA, BANCO DE LA REPÚBLICA - ESPE, vol. 8(15), pages 95-111, June.
    11. repec:ilo:ilowps:365055 is not listed on IDEAS
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    Cited by:

    1. Irene Iodice & Chiara Tomasi, 2015. "Skill upgrading, wage gap and international trade: firm-level evidence for Italian manufacturing firms," LEM Papers Series 2015/06, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    2. Sonia A. Agudelo & Hector Sala, 2016. "Wage setting in the Colombian manufacturing industry," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 24(1), pages 99-134, January.
    3. Furuta, Manabu, 2016. "Trade Liberalization and Wage Inequality in the Indian Manufacturing Sector," MPRA Paper 73709, University Library of Munich, Germany.

    More about this item

    Keywords

    trade liberalisation; skill-biased technical change; wage inequality; real wages; Mexico; manufacturing;

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General

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