What Has Happened to Wages in Mexico since NAFTA?

Gordon H. Hanson

NBER Working Paper No. 9563
Issued in March 2003
NBER Program(s):International Trade and Investment, Labor Studies

In this paper, I examine the impacts of trade and investment liberalization on the wage structure of Mexico. Part one of the paper surveys recent literature on the labor-market consequences of Mexico's economic reforms in the 1980?s. Mexico's policy reforms appear to have raised the demand for skill in the country, reduced rents in industries that prior to reform paid their workers high wages, and raised the premium paid to workers in states along the U.S. border. These changes have resulted in an increase in wage dispersion in the country. Part two of the paper examines changes in Mexico's wage structure during the 1990's. In the last decade, Mexico has experienced rising returns to skill, which mirror closely wage movements in the United States. There is, however, little evidence of wage convergence between the two countries. Regional wage differentials in Mexico have widened and appear to be explained largely by variation in regional access to foreign trade and investment and in regional opportunities for migration to the United States. I discuss implications of Mexico's experience for the rest of Latin America in the event a Free Trade Agreement of the Americas is enacted.

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Document Object Identifier (DOI): 10.3386/w9563

Published: Estevadeordal, Antoni, Dani Rodrik, Alan Taylor, and Andres Velasco (eds.) Integrating the Americas: FTAA and Beyond. Cambridge, MA: Harvard University Press, 2004.

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