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

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 the Mexican 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.

Structural Change and Wage Inequality in the Manufacturing Sector: Long Run Evidence from East Asia

“…Verhoogen, 2008, on Mexico). On the other hand, an appreciation of the exchange rate can favour the import of capital and more sophisticated inputs from more advanced countries, features which generally require recourse to a higher skilled workforce (Cornia, 2005), as found in other developing countries (Acar & Dogruel, 2012;Caselli, 2014). Besides this, we find that the coefficient measuring changes in the degree of openness of the capital account is generally negative but always not significant.…”

“…According to the SBTC hypothesis, the shift to higher technology increases the demand for skilled workers and raises their wages ( price effect) due the high complementarity between capital and skills (Welch, 1970). A large amount of evidence has been produced in support of this hypothesis, showing that wage inequality between skilled and unskilled workers has been rising over time, in both developed (Acemoglu, 2002;Card & di Nardo, 2002) and developing countries (Attanasio et al, 2004;Zhu & Trefler, 2005;Caselli, 2014). Similar results can also be seen in the East Asian case.…”

“…On the other hand, more recent evidence seems consistently to suggest that more openness worsens wage distribution in developing countries (Goldberg & Pavcnik, 2007;Szekely & Samano, 2012). This has been explained by the fact that trade liberalisation can also induce SBTC, thanks to access to more sophisticated inputs and new technologies (Cornia, 2005;Caselli, 2014).…”

Inequality, Power and Participation – Revisiting the Links

“…For many analysts, changing patterns of inequality are both a product of and contribute to changing patterns of global power. Studies in this regard focus therefore on issues of global trade (Caselli 2014), financial flows and international taxation. The recent financial crisis left many with the impression that financial markets are beyond the control of nation states and that the lack of proper financial market regulation has increased economic instability, which in turn has fuelled economic inequalities (Galbraith 2012).…”

Deriving Public Sector Workforce Insights: A Case Study Using Australian Public Sector Employment Profiles

“…From a government perspective, it turns out to be a function correlating the employees performance to align with the government's strategic goals and priorities like sustainable budgeting for example [1,2]. Additionally, with the increased use of digital technologies in the workforce, traditional jobs are at risk of being displaced and replaced by transformed job requirements and descriptions creating new types of jobs [6]. Thus the modernisation of existing workforce requires a robust workforce planning process that integrates future workforce needs so that capabilities are developed earlier.…”