Economic Liberalization and Rising College Premiums in Mexico: A Reinterpretation

36 Pages Posted: 15 Aug 2010 Last revised: 30 Jul 2015

Aashish Mehta

University of California, Santa Barbara

Belinda Acuna

University of California, Santa Barbara - Department of Economics

Date Written: December 15, 2011

Abstract

Mexico’s college premium rose in the 1990s. Studies employing structural decomposition analyses treat the college premium as the relative price of “skilled” to “unskilled” workers. They find that reallocations of labor across industries and occupations cannot account for rising college premiums, and often attribute them to widely observed trade-induced increases in skills demand within the manufacturing sector. In contrast, using a reduced-form decomposition that moves beyond a binary definition of skill and allows for inter-occupation wage differentials, we show that employment shifts across occupations and industries can account for the increase in the college premium. We link the rising premium, and differences in its trajectory by gender and cohort, to the growth of specific professions that produce services, not manufactured goods.

Keywords: Skill premium; employment composition; trade liberalization; Services; Latin America; Mexico

JEL Classification: F16, O15, J21

Suggested Citation

Mehta, Aashish and Acuna, Belinda, Economic Liberalization and Rising College Premiums in Mexico: A Reinterpretation (December 15, 2011). World Development, Vol. 40(9), pp.1908 - 1920, 2012. Available at SSRN: https://ssrn.com/abstract=1658782 or http://dx.doi.org/10.2139/ssrn.1658782

Aashish Sunil Mehta (Contact Author)

University of California, Santa Barbara ( email )

Santa Barbara, CA 93106
United States

HOME PAGE: http://www.global.ucsb.edu/people/aashish-mehta

Belinda Acuna

University of California, Santa Barbara - Department of Economics ( email )

2127 North Hall
Santa Barbara, CA 93106
United States

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