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The effect of trade and FDI on inter-industry wage differentials: The case of Mexico

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  • Noria, Gabriela López

Abstract

Taking advantage of the liberalization process under NAFTA, this paper assesses the relative importance of the degree of trade openness and Foreign Direct Investment (FDI) in explaining inter-industry wage differentials for the case of Mexico. Using INEGI's National Survey of Urban Employment for the period 1994–2004, the empirical analysis is conducted on two stages. In the first stage, individual wages are regressed on worker characteristics, job and firm attributes, informality and a set of federal entity and industry indicators. In the second stage, inter-industry wage differentials (derived from the coefficient estimates of the industry indicators) are regressed on trade and FDI variables. The main findings show that trade openness does not have a statistically significant effect on inter-industry wage differentials, whereas for the case of FDI, a positive nonlinear relationship is found to exist.

Suggested Citation

  • Noria, Gabriela López, 2015. "The effect of trade and FDI on inter-industry wage differentials: The case of Mexico," The North American Journal of Economics and Finance, Elsevier, vol. 34(C), pages 381-397.
    • Handle: RePEc:eee:ecofin:v:34:y:2015:i:c:p:381-397
    DOI: 10.1016/j.najef.2015.09.006
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    2. Ibarra-Olivo, J. Eduardo, 2021. "Foreign direct investment and youth educational outcomes in Mexican municipalities," Economics of Education Review, Elsevier, vol. 82(C).
    3. Mumtaz Hussain Shah, 2017. "Inward FDI in East Asian & Pacific Developing Countries due to WTO Led Liberalisation," Business & Economic Review, Institute of Management Sciences, Peshawar, Pakistan, vol. 9(2), pages 1-20, June.
    4. J. Eduardo Ibarra-Olivo & Thomas Neise & Moritz Breul & Jöran Wrana, 2024. "FDI and human capital development: a tale of two Southeast Asian economies," Journal of International Business Policy, Palgrave Macmillan, vol. 7(3), pages 314-336, September.
    5. Feicheng Wang & Chris Milner & Juliane Scheffel, 2018. "Globalization and inter‐industry wage differentials in China," Review of International Economics, Wiley Blackwell, vol. 26(2), pages 404-437, May.
    6. Idalid Alamilla-Gachuz & María del Carmen Cervantes-Siurob & Krisztina E. Lengyel-Almos, 2020. "Impacto de IED en la productividad y salarios en México," Ensayos de Economía 19135, Universidad Nacional de Colombia Sede Medellín.

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