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Why is Wage Dispersion Growing in Mexico? Is it the Incidence of Reforms or the Growing Demands for Skills

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Listed:
  • Michael Ian Cragg

    (Department of Economics, Columbia University)

  • Mario Epelbaum

    (Centro de Investigacion Economica (CIE), Instituto Tecnologico Autonomo de Mexico (ITAM))

Abstract

In the mid 1980s, Mexico undertook major trade reform, privatization and deregulation. This coincided with a rapid expansion in wages and employment that led to a rise in wage dispersion. This paper examines the role of industry and occupation-specific effects in explaining the growing dispersion. We find that despite the magnitude and pace of the reforms, industry-specific effects explain little of the rising wage dispersion. In contrast occupation-specific effects can explain almost half of the growing wage dispersion. Finally, we find that the economy became more skill-intensive and that this effect was larger for the traded sector because this sector experienced much smaller low-skilled employment growth. We therefore suggest that competition from imports had an important role in the fall of the relative demand for less-skilled workers.

Suggested Citation

  • Michael Ian Cragg & Mario Epelbaum, 1995. "Why is Wage Dispersion Growing in Mexico? Is it the Incidence of Reforms or the Growing Demands for Skills," Working Papers 9506, Centro de Investigacion Economica, ITAM.
    • Handle: RePEc:cie:wpaper:9506
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    Cited by:

    1. Sèna Kimm Gnangnon, 2020. "Development aid, remittances inflows and wages in the manufacturing sector," Journal of Social and Economic Development, Springer;Institute for Social and Economic Change, vol. 22(2), pages 278-304, December.
    2. Gnangnon, Sèna Kimm, 2020. "Development Aid, Remittances Inflows and Wages in the Manufacturing Sector of Recipient-Countries," EconStor Preprints 213439, ZBW - Leibniz Information Centre for Economics.

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