The Effect of Trade and FDI on Inter-industry Wage Differentials: The Case of Mexico

López Noria Gabriela

No 2011-10, Working Papers from Banco de México

Abstract: Taking advantage of the liberalization process under NAFTA, this paper assesses the relative importance of the degree of trade openness and Foreign Direct Investment (FDI) in explaining inter-industry wage differentials for the case of Mexico. Using INEGI's National Survey of Urban Employment for the period 1994-2004, the empirical analysis is conducted on two stages. In the first stage, individual wages are regressed on worker characteristics, job and firm attributes, informality and a set of industry indicators. In the second stage, inter-industry wage differentials (derived from the coefficient estimates of the industry indicators) are regressed on trade and FDI variables. The main findings show that trade openness does not have a robust and statistically significant effect on inter-industry wage differentials, whereas for the case of FDI, a positive nonlinear relationship is found to exist.

JEL-codes: F16 G31 J23 M52 (search for similar items in EconPapers)
Date: 2011-10
New Economics Papers: this item is included in nep-cis, nep-dev, nep-int, nep-lab and nep-lma
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Persistent link: https://EconPapers.repec.org/RePEc:bdm:wpaper:2011-10

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