Working Paper: NBER ID: w9563
Authors: Gordon H. Hanson
Abstract: In this paper, I examine the impacts of trade and investment liberalization on the wage structure of Mexico. Part one of the paper surveys recent literature on the labor-market consequences of Mexico's economic reforms in the 1980?s. Mexico's policy reforms appear to have raised the demand for skill in the country, reduced rents in industries that prior to reform paid their workers high wages, and raised the premium paid to workers in states along the U.S. border. These changes have resulted in an increase in wage dispersion in the country. Part two of the paper examines changes in Mexico's wage structure during the 1990's. In the last decade, Mexico has experienced rising returns to skill, which mirror closely wage movements in the United States. There is, however, little evidence of wage convergence between the two countries. Regional wage differentials in Mexico have widened and appear to be explained largely by variation in regional access to foreign trade and investment and in regional opportunities for migration to the United States. I discuss implications of Mexico's experience for the rest of Latin America in the event a Free Trade Agreement of the Americas is enacted.
Keywords: wages; Mexico; NAFTA; free trade; labor market
JEL Codes: F1; J3
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| trade and investment liberalization (F13) | demand for skilled labor (J24) |
| demand for skilled labor (J24) | wage dispersion (J31) |
| trade and investment liberalization (F13) | wage levels for skilled workers (J31) |
| tariff reductions (F13) | relative wages for skilled workers (J31) |
| regional access to foreign trade and investment (F15) | wage changes (J31) |
| establishment of maquiladoras (L23) | demand for skilled labor (J24) |
| establishment of maquiladoras (L23) | wage structures (J31) |
| foreign direct investment (F23) | labor demand (J23) |
| foreign direct investment (F23) | wage structures (J31) |