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Trade, Technology, and Wage Inequality


  • Gordon H. Hanson
  • Ann Harrison


In Mexico during the 1980s, the wages of more-educated, more- experienced workers rose relative to those of less-educated, less- experienced workers. We assess the extent to which the increase in the skilled-unskilled wage gap was associated with Mexico's recent trade reform. In particular, we examine whether trade reform has shifted employment towards industries that are relatively intensive in the use of skilled labor (Stolper-Samuelson-type effects). The results suggest that the rising wage gap is associated with changes internal to industries and even internal to plants that cannot be explained by Stolper-Samuelson-type effects. We also find that other characteristics associated with globalization -- such as foreign investment and export orientation -- matter. Exporting firms and joint ventures pay higher wages to skilled workers and demand more skilled labor than other firms.

Suggested Citation

  • Gordon H. Hanson & Ann Harrison, 1995. "Trade, Technology, and Wage Inequality," NBER Working Papers 5110, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:5110
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    References listed on IDEAS

    1. Robert E. Lipsey, 1994. "Foreign-Owned Firms and U.S. Wages," NBER Working Papers 4927, National Bureau of Economic Research, Inc.
    2. Steven J. Davis, 1992. "Cross-Country Patterns of Change in Relative Wages," NBER Chapters,in: NBER Macroeconomics Annual 1992, Volume 7, pages 239-300 National Bureau of Economic Research, Inc.
    3. Bernard, Andrew B. & Jensen, J. Bradford, 1997. "Exporters, skill upgrading, and the wage gap," Journal of International Economics, Elsevier, vol. 42(1-2), pages 3-31, February.
    4. Mark Doms & Timothy Dunne & Kenneth R. Troske, 1997. "Workers, Wages, and Technology," The Quarterly Journal of Economics, Oxford University Press, vol. 112(1), pages 253-290.
    5. Feenstra, Robert C. & Hanson, Gordon H., 1997. "Foreign direct investment and relative wages: Evidence from Mexico's maquiladoras," Journal of International Economics, Elsevier, vol. 42(3-4), pages 371-393, May.
    6. Ethier, Wilfred J., 1984. "Higher dimensional issues in trade theory," Handbook of International Economics,in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 1, chapter 3, pages 131-184 Elsevier.
    7. Steve J. Davis & John Haltiwanger, 1991. "Wage Dispersion Between and Within U.S. Manufacturing Plants, 1963-1986," NBER Working Papers 3722, National Bureau of Economic Research, Inc.
    8. Edward E. Leamer, 1992. "Wage Effects of A U.S. - Mexican Free Trade Agreement," NBER Working Papers 3991, National Bureau of Economic Research, Inc.
    9. Wolfgang F. Stolper & Paul A. Samuelson, 1941. "Protection and Real Wages," Review of Economic Studies, Oxford University Press, vol. 9(1), pages 58-73.
    10. Edward E. Leamer, 1994. "Trade, Wages and Revolving Door Ideas," NBER Working Papers 4716, National Bureau of Economic Research, Inc.
    11. 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 410-442, June.
    12. George J. Borjas & Valerie A. Ramey, 1993. "Foreign Competition, Market Power and Wage Inequality: Theory and Evidence," NBER Working Papers 4556, National Bureau of Economic Research, Inc.
    13. Michael Ian Cragg & Mario Epelbaum, 1995. "The Premium for Skills in LDCs: Evidence from Mexico," Working Papers 9505, Centro de Investigacion Economica, ITAM.
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    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration


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