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Labor Skill, Trade and Capital Intensity, and the Fall of Manufacturing Real Wages: Panel Evidence from Mexican Industries

Author

Listed:
  • Ibarra Carlos A.

    (Universidad de las Americas Puebla (UDLAP), Cholula, Pue. 72820, Mexico)

Abstract

The paper studies the fall in manufacturing real wages that took place in Mexico after the China shock of 2001. It shows, first, that the wage reductions reflected a significant transmission of the China shock, plus a weak link between labor-productivity and real-wage growth; and second, that the weight of these two factors was conditioned by the skill level of workers and the trade and capital intensity of industries in Mexico. Thus, while the China shock hit harder medium and high-skilled workers in capital-intensive industries, the weak link between productivity and wage growth affected more the low-skilled in trade-intensive industries. Results come from the estimation of wage equations by skill level for an annual panel of 20 manufacturing industries at NAICS three-digit level, for different periods but focusing on 1996–2017 (the NAFTA period) and 2003–2017 (the post-China shock period).

Suggested Citation

  • Ibarra Carlos A., 2023. "Labor Skill, Trade and Capital Intensity, and the Fall of Manufacturing Real Wages: Panel Evidence from Mexican Industries," Journal of Globalization and Development, De Gruyter, vol. 14(1), pages 21-50, June.
    • Handle: RePEc:bpj:globdv:v:14:y:2023:i:1:p:21-50:n:1
    DOI: 10.1515/jgd-2021-0053
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    More about this item

    Keywords

    manufacturing real wages; labor share; labor skill; capital intensity; trade intensity; China shock;
    All these keywords.

    JEL classification:

    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F66 - International Economics - - Economic Impacts of Globalization - - - Labor
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology

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