Trade and Wages: Two Puzzles from Mexico

Raymond Robertson

The World Economy, 2007, vol. 30, issue 9, 1378-1398

Abstract: Mexico plays an important role in the developing†country trade†liberalisation literature because it liberalised early and extensively. Numerous papers analysed changes in Mexican wage levels and inequality after Mexico joined the GATT in 1986. This paper reviews recent papers that analyse changes in wage levels and inequality since the North American Free Trade Agreement in 1994. Two main puzzles emerge. First, wage growth rates are similar before and after NAFTA. Second, Mexican wage inequality, which received much attention after its post†GATT rise, falls steadily after NAFTA. This paper reviews several possible explanations for these two phenomena.

Date: 2007
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