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Returns to Education, Sector Premiums, and Male Wage Inequality in Mexico

  • César P. Bouillon

This paper examines Mexico's increase in wage inequality using data from household surveys (Encuesta Nacional de Ingreso Gasto de los Hogares de México) produced by the Mexican Institute for Statistics, Geography and Informatics (Instituto Nacional de Estadística, Geografía e Informática). An econometric simulation technique based on Juhn, Murphy, and Pierce (1993) and developed for the household level by Bourguignon, Fournier, and Gurgand (1998) is used to measure the contribution of changes in skill premiums and sector returns to the increase in inequality in Mexican males' wages during the period of analysis. The household surveys used in this paper make it possible to decompose some of the changes in inequality in Mexico after trade reform in the mid-1980s. The regressions and simulation technique confirm that male Mexican wage earners experienced an important increase in skill premiums and a decrease in sector wage premiums after the trade reform. The increase in skill premiums was unequalizing, while the decrease in sector premiums was equalizing.

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Paper provided by Inter-American Development Bank in its series IDB Publications (Working Papers) with number 51038.

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Date of creation: Oct 2000
Date of revision:
Handle: RePEc:idb:brikps:51038
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  1. Cragg, Michael Ian & Epelbaum, Mario, 1996. "Why has wage dispersion grown in Mexico? Is it the incidence of reforms or the growing demand for skills?," Journal of Development Economics, Elsevier, vol. 51(1), pages 99-116, October.
  2. Robert C. Feenstra & Gordon H. Hanson, 1995. "Foreign Direct Investment and Relative Wages: Evidence from Mexico's Maquiladoras," NBER Working Papers 5122, National Bureau of Economic Research, Inc.
  3. Eduardo Lora & Mauricio Olivera, 1998. "Macro Policy and Employment Problems in Latin America," Research Department Publications 4116, Inter-American Development Bank, Research Department.
  4. Pissarides, Christopher A, 1997. "Learning by Trading and the Returns to Human Capital in Developing Countries," World Bank Economic Review, World Bank Group, vol. 11(1), pages 17-32, January.
  5. Eduardo Lora & Gustavo Márquez, 1998. "The Employment Problem in Latin America: Perceptions and Stylized Facts," IDB Publications (Working Papers) 6437, Inter-American Development Bank.
  6. Gordon H. Hanson & Ann Harrison, 1999. "Trade liberalization and wage inequality in Mexico," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 52(2), pages 271-288, January.
  7. Tan, Hong & Batra, Geeta, 1997. "Technology and Firm Size-Wage Differentials in Colombia, Mexico, and Taiwan (China)," World Bank Economic Review, World Bank Group, vol. 11(1), pages 59-83, January.
  8. Juhn, Chinhui & Murphy, Kevin M & Pierce, Brooks, 1993. "Wage Inequality and the Rise in Returns to Skill," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 410-42, June.
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