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Globalization and Wage Convergence: Mexico and the United States

Author

Listed:
  • Davide Gandolfi

    (Macalester College)

  • Timothy Halliday

    (University of Hawaii at Manoa, Department of Economics; UHERO, University of Hawaii at Manoa; IZA)

Abstract

Neoclassical trade theory suggests that factor price convergence should follow increased commercial integration. Rising commercial integration and foreign direct investment followed the 1994 North American Free Trade Agreement between the United States and Mexico. This paper evaluates the degree of wage convergence between Mexico and the United States between 1988 and 2011. We apply a synthetic panel approach to employment survey data and a more descriptive approach to Census data from Mexico and the US. First, we find no evidence of long-run wage convergence among cohorts characterized by low migration propensities although this was, in part, due to large macroeconomic shocks. On the other hand, we do find some evidence of convergence for workers with high migration propensities. Finally, we find evidence of convergence in the border of Mexico vis-�-vis its interior in the 1990s but this was reversed in the 2000s.

Suggested Citation

  • Davide Gandolfi & Timothy Halliday, 2014. "Globalization and Wage Convergence: Mexico and the United States," Working Papers 2014-4, University of Hawaii Economic Research Organization, University of Hawaii at Manoa.
    • Handle: RePEc:hae:wpaper:2014-4
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    References listed on IDEAS

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    Cited by:

    1. Carbajal-De-Nova, Carolina, 2017. "Wage gaps and manufacturing output: A comparison between production workers in Mexico and the United States," MPRA Paper 93099, University Library of Munich, Germany, revised 14 Sep 2017.

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    More about this item

    Keywords

    Migration; Labor-market Integration; Factor Price Equalization;
    All these keywords.

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration

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