Trade Liberalization and Wage Inequality in Mexico

Posted: 22 Jan 1999

See all articles by Gordon H. Hanson

Gordon H. Hanson

University of California, San Diego (UCSD) - Graduate School of International Relations and Pacific Studies (IRPS); National Bureau of Economic Research (NBER)

Ann E. Harrison

University of Pennsylvania - Management Department; National Bureau of Economic Research (NBER)

Abstract

During the 1980s in Mexico the wage gap between skilled and unskilled workers widened. The authors assess the extent to which this increased wage inequality was associated with Mexico's sweeping trade reform in 1985. Examining data on 2,354 Mexican manufacturing plants for 1984-90 and Mexican Industrial Census data for 1965-88, they find that the reduction in tariff protection in 1985 disproportionately affected low-skilled industries. Goods from that sector, the authors suggest, may have fallen in price because of increased competition from economies with reserves of cheap unskilled labor larger than Mexico's. The consequent increase in the relative price of skill-intensive goods could explain the increase in wage inequality.

JEL Classification: F13, J31

Suggested Citation

Hanson, Gordon H. and Harrison, Ann E., Trade Liberalization and Wage Inequality in Mexico. Industrial Labor Relations Review, January 1999. Available at SSRN: https://ssrn.com/abstract=137552

Gordon H. Hanson (Contact Author)

University of California, San Diego (UCSD) - Graduate School of International Relations and Pacific Studies (IRPS) ( email )

9500 Gilman Drive
La Jolla, CA 92093-0519
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Ann E. Harrison

University of Pennsylvania - Management Department ( email )

The Wharton School
Philadelphia, PA 19104-6370
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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