IDEAS home Printed from
   My bibliography  Save this paper

Wage Effects of A U.S. - Mexican Free Trade Agreement


  • Edward E. Leamer


This paper analyzes the extent to which education will be subsidized when the subsidy rate is determined by majority voting. The analysis takes place in a framework where education is a discrete decision and all individuals would like to obtain an education because of its effect on future earnings. Individuals differ in their initial income levels. Mexico doesn't seem economically large enough now to have a significant effect on the prices of goods and the earnings of labor in the United States, but Mexican population growth and productivity gains induced by liberalization will make the Mexico of the future much larger than today, especially in those sectors that use intensively Mexico's abundant low-skilled labor. Furthermore, in a free trade agreement with the United States, Mexico has an incentive to concentrate production on those sectors that are most protected by the U.S, from third-country competition, and to export all that product to the high-priced protected U.S. market. For all these reasons, the Mexico of the future is large enough to undo current or future U.S. protection designed to maintain wages of low-skilled workers. With or without a free trade agreement. the United States faces a substantial problem with the continuing economic deterioration of the lowest skilled workers. A free trade agreement with Mexico would keep the U.S. from using protectionism to deal with this problem.

Suggested Citation

  • Edward E. Leamer, 1992. "Wage Effects of A U.S. - Mexican Free Trade Agreement," NBER Working Papers 3991, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:3991
    Note: ITI IFM

    Download full text from publisher

    File URL:
    Download Restriction: no

    More about this item


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:3991. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.