The effect of trade and FDI on inter-industry wage differentials: The case of Mexico |
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| Institution: | 1. School of Economic Mathematics, Southwestern University of Finance and Economics, Chengdu 611130, PR China;2. School of Finance, Southwestern University of Finance and Economics, Chengdu 611130, PR China;3. Department of Mathematics, Wilfrid Laurier University, Waterloo, Ontario, Canada N2L 3C5;1. School of Securities and Futures, Southwestern University of Finance and Economics, Chengdu 611130, China;2. The Wang Yanan Institute for Studies in Economics, Xiamen University, Xiamen, Fujian 361005, China |
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| 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. |
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| Keywords: | Wage inequality Trade liberalization Foreign Direct Investment NAFTA |
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