Trade and Wages: Two Puzzles from Mexico

Robertson, Raymond

doi:10.1111/j.1467-9701.2007.01048.x

Cited by 52 publications

(52 citation statements)

References 48 publications

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“…The skill premium implied by our model, which is the wage of skilled workers relative to unskilled workers employed in the formal sector, is 1.7, whereas in the data, the average wage of non-production workers relative to production workers in the Mexican manufacturing sector is close to 2.7 in 2000 (Robertson, 2007). Our model also underestimates the maquila sector's share of manufacturing employment (3.5% in our model versus 20% in the data).…”

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confidence: 49%

Maquiladoras and Informality: A Mixed Blessing

2011

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Mexico experienced a tremendous expansion of its export-processing maquila sector during the 1990s. At the same time, a large proportion of its labor force remains employed in the informal sector. Since one of the main objectives of the maquiladora program was to increase formal employment, we study how the rapid increase in maquiladora activity has affected labor market outcomes in Mexico. We develop a heterogeneous firm model with imperfect labor markets that captures salient features of the Mexican economy such as the differences between maquila and non-maquila manufacturing plants and the existence of an informal sector. We calibrate the model's parameters to match key cross-sectional moments characterizing the Mexican economy. Our quantitative model indicates that the expansion of the maquila sector during the 1990s produced an increase in informality of 0.9% and a reduction in the skill premium and overall welfare of 2.7% and 3.7% respectively. A counterfactual experiment in which we shut down the informal sector completely results in a reduction of Mexican welfare of 33.5% relative to the equilibrium with an informal sector.JEL codes: F12, F14, F16, F23, O24

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confidence: 49%

Maquiladoras and Informality: A Mixed Blessing

2011

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“…Between 2001 and, other reforms were introduced. These reforms entailed changes in the labour force composition, in terms of its education and experience (López-Acevedo, 2006), in terms of supply and demand of labour (Campos-Vazquez, 2010), the effects of trade (Robertson, 2007), the expansion of government monetary transfers targeting the poor, the rise in the share of remittances and the fall in the skill premium between skilled and unskilled workers. Moreover, in the late 1990s, urban informal labour represented a major part of the workforce, with various studies reporting levels oscillating between 20 and 40%.…”

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confidence: 99%

Changes in Wage Structure in Mexico Going Beyond the Mean: An Analysis of Differences in Distribution, 1987-2008

2012

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“…In order to incorporate these observations into the quantitative analysis of the impact of trade liberalization on inequality, I build an overlapping-generations model with endogenous skill acqui-1 See Robertson (2007) and Campos-Vazquez (2010) who attribute the decrease in the college premium to an increase in the supply of college graduates after NAFTA.…”

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Skill acquisition and the dynamics of trade-induced inequality

Danziger

2017

Journal of International Economics

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This paper quanti…es the impact of trade liberalization on wage inequality between workers of di¤erent skill levels and across age groups. I propose a model in which trade liberalization increases the demand for skill due to production share reallocation across …rms and technology switching. However, unlike in the existing literature, I endogenize the skill supply by supplementing the skill-demand side of the model with an overlapping-generations model of skill acquisition. I calibrate the model to 2007 US data and simulate the economy's transition path in response to the removal of policy trade barriers. Workers have rational expectations and, therefore, must take into account the general-equilibrium e¤ects on wages of changes in skill supply during the economy's transition. I …nd that the aggregate gains from trade liberalization, de…ned as the increase in discounted real earnings relative to their pre-liberalization level, are 5.9%. However, these gains are not distributed evenly among workers. For those alive at the time of implementation of the new trade policy, the oldest educated workers' discounted real lifetime earnings increase by 9.9%, while the oldest uneducated workers' discounted real lifetime earnings increase by only 1.5%. On the one hand, ignoring the economy's transition leads to an understatement of trade-induced inequality as this fails to account for transitory inequality. On the other hand, ignoring the endogeneity of the skill supply leads to an overstatement of trade-induced inequality as this fails to account for the equalizing e¤ect of the endogenous skill-supply adjustment.

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Trade and Wages: Two Puzzles from Mexico

Cited by 52 publications

References 48 publications

Maquiladoras and Informality: A Mixed Blessing

Maquiladoras and Informality: A Mixed Blessing

Changes in Wage Structure in Mexico Going Beyond the Mean: An Analysis of Differences in Distribution, 1987-2008

Skill acquisition and the dynamics of trade-induced inequality

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