TY  - JOUR
AU  - Feenstra,Robert C.
AU  - Hanson,Gordon H.
TI  - Foreign Direct Investment and Relative Wages: Evidence from Mexico's    Maquiladoras
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 5122
PY  - 1995
Y2  - May 1995
UR  - http://www.nber.org/papers/w5122
L1  - http://www.nber.org/papers/w5122.pdf
N1  - Author contact info:
Robert C. Feenstra
Department of Economics
University of California, Davis
One Shields Avenue
Davis, CA  95616
Tel: 530/752-7022
Fax: 530/752-9382
E-Mail: rcfeenstra@ucdavis.edu

Gordon H. Hanson
IR/PS 0519
University of California, San Diego
9500 Gilman Drive
La Jolla, CA  92093-0519
Tel: 858/822-5087
Fax: 858/534-3939
E-Mail: gohanson@ucsd.edu
AB  - In this paper, we examine the increase in the relative wages of skilled workers in Mexico during the 1980s.  We argue that rising wage inequality in Mexico is linked to capital inflows from abroad.  The effect of these capital inflows, which correspond to an increase in outsourcing by multinationals from the United States and other Northern countries, is to shift production in Mexico towards relatively skill-intensive goods thereby increasing the relative demand for skilled labor.  We study the impact of foreign direct investment (FDI) on the share of skilled labor in total wages in Mexico using state-level data on two-digit industries from the Industrial Census for the period 1975 to 1988.  We measure the state- level growth in FDI using data on the regional activities of foreign- owned assembly plants.  We find that growth in FDI is positively correlated with the relative demand for skilled labor.  In the regions where FDI has been most concentrated, growth in FDI can account for over 50 percent of the increase in the skilled labor share of total wages that occurred during the late 1980s.
ER  -