IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Employment and wage effects of trade liberalization : the case of Mexican manufacturing

  • Revenga, Ana
Registered author(s):

    In 1985, after decades of an import-substitution industrial strategy, Mexico initiated a radical liberalization of its external sector. Between 1985 and 1988, import licensing requirements were scaled back to a quarter of earlier levels, reference prices were removed, and tariff rates on most products were substantially reduced. By 1989, Mexico was one of the most open economies in the developing world. Adjusting to trade liberalization required the reallocation of resources between sectors and entailed substantial dislocation of workers. The author analyzes how Mexico's trade liberalization (1985-87) affected employment and wages in indusry, focusing on how it affected average employment and earnings rather than on the link between trade and relative wages. She examines the tradeoff between wage and employment adjustment, identifies which labor groups benefited more from liberalization, and tries to associate changes in employment and wages directly with measures of change in trade protection, rather than link them to changes in imports and exports (which is more common). The author also finds that reductions in quota coverage and tariff levels are associated with moderate reductions in firm-level employment. A 10-point reduction in tariff levels (between 1985 and 1990) is associated with a 2- to 3- percent decline in employment in Mexico. Changes in quota average appear to have no discernible effect on wages, but reduction in tariff levels are associated with increases in average wages. This seems to reflect improved productivity in the reformed industries, which may be related to a shift toward the use of more skilled workers. There seems to have been a slight shift in the skill mix in favor of nonproduction workers. This was paralleled by a sharper increase in the wage differential between skilled and unskilled workers. The wages and employment of skilled production workers were significantly more responsive to changes in protection levels than those of nonproduction workers - perhaps partly because production workers were more heavily concentrated in the industries in which protection levels were greatly reduced.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL: http://www-wds.worldbank.org/servlet/WDSContentServer/WDSP/IB/1995/10/01/000009265_3961019150349/Rendered/PDF/multi0page.pdf
    Download Restriction: no

    Paper provided by The World Bank in its series Policy Research Working Paper Series with number 1524.

    as
    in new window

    Length:
    Date of creation: 31 Oct 1995
    Date of revision:
    Handle: RePEc:wbk:wbrwps:1524
    Contact details of provider: Postal: 1818 H Street, N.W., Washington, DC 20433
    Phone: (202) 477-1234
    Web page: http://www.worldbank.org/
    Email:


    More information through EDIRC

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    as in new window
    1. Katherine G. Abraham & Susan N. Houseman, 1993. "Does Employment Protection Inhibit Labor Market Flexibility? Lessons from Germany, France and Belgium," Upjohn Working Papers and Journal Articles 93-16, W.E. Upjohn Institute for Employment Research.
    2. Layard, Richard & Nickell, Stephen & Jackman, Richard, 2005. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780199279173, March.
    3. Hanson, G.H. & Harrison, A., 1995. "Trade, Technology and Wage Inequality," Papers 95-20, Columbia - Graduate School of Business.
    4. Bentolila, Samuel & Dolado, Juan J., 1993. "Who Are the Insiders? Wage Setting in Spanish Manufacturing Firms," CEPR Discussion Papers 754, C.E.P.R. Discussion Papers.
    5. Ana R. de Lamo & Juan J. Dolado, 1993. "Un modelo del mercado de trabajo y la restricción de oferta en la economía española," Investigaciones Economicas, Fundación SEPI, vol. 17(1), pages 87-118, January.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:1524. 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: (Roula I. Yazigi)

    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.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with 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 profile, as there may be some citations waiting for confirmation.

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

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.