Trade, Migration, and the Place Premium: Mexico and the United States

44 Pages Posted: 27 Jun 2015

See all articles by Davide Gandolfi

Davide Gandolfi

Macalester College

Timothy Halliday

University of Hawaii - Department of Economics; IZA Institute of Labor Economics

Raymond Robertson

Macalester College - Department of Economics

Date Written: March 11, 2015

Abstract

Large wage differences between countries (“place premiums”) are well documented. Theory suggests that factor price convergence should follow increased migration, capital flows, and commercial integration. All three have characterized the relationship between the United States and Mexico over the last 25 years. This paper evaluates the degree of wage convergence between these countries during the period 1988 and 2011. We match survey and census data from Mexico and the United States to estimate the change in wage differentials for observationally identical workers over time. We find very little evidence of convergence. What evidence we do find is most likely due to factors unrelated to US-Mexico integration. While migration and trade liberalization may reduce the US-Mexico wage differential, these effects are small when compared to the overall wage gap.

Keywords: Migration, Labor-market Integration, Factor Price Equalization

JEL Classification: F15, F16, J31, F22

Suggested Citation

Gandolfi, Davide and Halliday, Timothy and Robertson, Raymond E., Trade, Migration, and the Place Premium: Mexico and the United States (March 11, 2015). Center for Global Development Working Paper No. 396, Available at SSRN: https://ssrn.com/abstract=2623087 or http://dx.doi.org/10.2139/ssrn.2623087

Davide Gandolfi (Contact Author)

Macalester College ( email )

1600 Grand Avenue
St. Paul, MN 55105
United States

Timothy Halliday

University of Hawaii - Department of Economics ( email )

Honolulu, HI 96822
United States

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Raymond E. Robertson

Macalester College - Department of Economics ( email )

1600 Grand Ave.
Saint Paul, MN 55105
United States

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