The impact of the US/Mexico border region and concentrations of Mexican-Americans on Mexican-American earnings

Alberto E. Davila

ISU General Staff Papers from Iowa State University, Department of Economics

Abstract: The purpose of this dissertation was to investigate the determinants of geographic wage differentials as they apply particularly to Mexican-Americans. Two questions are asked. (1) Is there a U.S./Mexico border/nonborder wage differential? (2) Are compensating wage differentials important in the wage structure of Mexican-Americans?;The first question has already been addressed in the literature, but the analysis suggested in this study overcomes some of the potential problems found in earlier studies. The second question analyzes the possibility of compensating wage differentials (in the context of the Hedonic Model) that could be due to either the distance that Mexican-Americans are located from the Mexican border or the concentration of Mexican-Americans in the SMSAs they live in. The major data source used is the 1970 Census of Population data;The findings in this study suggest no evidence of a real or nominal border/nonborder earnings differential when socioeconomic characteristics are controlled for. However, when subdivisions are made on the aggregate data, a nominal earnings differential is found for Mexican-Americans, in particular for Mexican-Americans from the east (this area excludes California SMSAs). This differential, however, disappears when real earnings are studied;This is no clear evidence that compensating wage differentials are important in the wage structure of Mexican-Americans. Distance from the border shows no effect as a compensating differential. The concentration of Mexican-Americans in an SMSA is negative as expected, but there are conflicting interpretations of this result. Specifically, this variable may pick up other noncompensating effects such as discrimination and illegal alien effects;The policy implications of this research would suggest that any program designed to increase earnings along the border may be counterproductive since it would be raising wages which otherwise appear to be in approximate balance. On the other hand, if SMSAs with high concentrations of Mexican-Americans (MA) are used, then future research should be geared to determining the sources of the negative MA effect on earnings.

Date: 1982-01-01
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