Trade, skill-biased technical change and wages in Mexican manufacturing

Mauro Caselli

No 2010-28, CSAE Working Paper Series from Centre for the Study of African Economies, University of Oxford

Abstract: This paper analyses and quantifies the effects of trade liberalisation and skill-biased technical change, both exogenous and trade-induced, on the skill premium and real wages of unskilled and skilled workers in theMexican manufacturing sector, using industry- and firm-level data for 1984-1990 from the Encuesta Industrial Anual. The novelty of the paper lies in its strategy for identifying causality, which uses differences across industries over time in the relative price of machinery and equipment in the US as an instrument for skill-biased technical change. The effect of trade-induced SBTC on wages, and especially on wage inequality, appears substantial. The regressions show that trade liberalisation and changes in the relative price of equipment in the US, which induce exogenous SBTC in Mexico, explain one quarter of the increase in relative skilled wages between 1984 and 1990. This rise in the skill premium due to SBTC and trade liberalisation mainly reflect a rise in real skilled wages, although with some specifications it was amplified by a fall in the real wages of unskilled workers.

Keywords: trade liberalisation; skill-biased technical change; wage inequality; real wages; Mexico; manufacturing (search for similar items in EconPapers)
JEL-codes: F14 J30 L60 O30 (search for similar items in EconPapers)
Date: 2010
New Economics Papers: this item is included in nep-dev and nep-lab
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Citations: View citations in EconPapers (1)

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Journal Article: Trade, skill-biased technical change and wages in Mexican manufacturing (2014)
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