TRADE LIBERALIZATION AND WAGE INEQUALITY IN MEXICO

Gordon Hanson and Ann Harrison

Chapter 3 in Globalization, Firms, and Workers, 2022, pp 43-60 from World Scientific Publishing Co. Pte. Ltd.

Abstract: During the 1980s in Mexico the wage gap between skilled and unskilled workers widened. The authors assess the extent to which this increased wage inequality was associated with Mexico’s sweeping trade reform in 1985. Examining data on 2,354 Mexican manufacturing plants for 1984-90 and Mexican Industrial Census data for 1965-88, they find that the reduction in tariff protection in 1985 disproportionately affected low-skilled industries. Goods from that sector, the authors suggest, may have fallen in price because of increased competition from economies with reserves of cheap unskilled labor larger than Mexico’s. The consequent increase in the relative price of skill-intensive goods could explain the increase in wage inequality.

Keywords: Globalization; Trade Reform; Foreign Direct Investment; Labour Markets; Employment; Wages; Offshoring; Innovation; Credit Constraints; Industrial Policy; Labour Rights Activism (search for similar items in EconPapers)
JEL-codes: F02 F6 F63 (search for similar items in EconPapers)
Date: 2022
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Journal Article: Trade Liberalization and Wage Inequality in Mexico (1999)
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