Why is Wage Dispersion Growing in Mexico? Is it the Incidence of Reforms or the Growing Demands for Skills

Michael Ian Cragg and Mario Epelbaum
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Michael Ian Cragg: Department of Economics, Columbia University
Mario Epelbaum: Centro de Investigacion Economica (CIE), Instituto Tecnologico Autonomo de Mexico (ITAM)

No 9506, Working Papers from Centro de Investigacion Economica, ITAM

Abstract: In the mid 1980s, Mexico undertook major trade reform, privatization and deregulation. This coincided with a rapid expansion in wages and employment that led to a rise in wage dispersion. This paper examines the role of industry and occupation-specific effects in explaining the growing dispersion. We find that despite the magnitude and pace of the reforms, industry-specific effects explain little of the rising wage dispersion. In contrast occupation-specific effects can explain almost half of the growing wage dispersion. Finally, we find that the economy became more skill-intensive and that this effect was larger for the traded sector because this sector experienced much smaller low-skilled employment growth. We therefore suggest that competition from imports had an important role in the fall of the relative demand for less-skilled workers.

Pages: 25 pages
Date: 1995-08
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:cie:wpaper:9506

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