 Why did wage inequality decrease in Mexico after NAFTA?Serie documentos de trabajo del Centro de Estudios Económicos from El Colegio de México, Centro de Estudios Económicos Abstract: Contrary to what happened before NAFTA, wage inequality in Mexico decreased after 1994. This paper investigates the forces behind the post NAFTA decrease in wage inequality. Using a quantile decomposition, I show that the decline in wage inequality is driven by a decline in the returns to education and potential experience, especially at the top of the wage distribution. Supply and demand are the main contributors for this change. On the supply side, there were substantial increases in college enrollment rates after 1994, which translated into an increase in the proportion of workers with a college degree. However, this increase in supply was not met by an increase in demand for the highly educated: the proportion of the workforce in top qualified occupations and close to the top occupations did not increase as much as the increase in supply. As a result, college educated workers put wage pressures in top and less than top qualified occupations. A Bound and Johnson (1992) decomposition confirms that changes in relative supply are the main determinant behind the decrease in wage inequality. Keywords: wage inequality; Mexico; education; employment (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:emx:ceedoc:2010-15 Access Statistics for this paper More papers in Serie documentos de trabajo del Centro de Estudios Económicos from El Colegio de México, Centro de Estudios Económicos Contact information at EDIRC. |
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