Mexico: Human Capital Effects on Wages and Productivity

31 Pages Posted: 10 Jan 2006

Date Written: December 2005

Abstract

The authors follow the Hellerstein, Neumark, and Troske (1999) framework to estimate marginal productivity differentials and compare them with estimated relative wages. The analysis provides evidence on productivity and nonproductivity-based determinations of wages. Special emphasis is given to the effects of human capital variables, such as education, experience, and training on wages and productivity differentials. Higher education yields higher productivity. However, highly educated workers earn less than their productivity differentials would predict. On average, highly educated workers are unable to fully appropriate their productivity gains of education through wages. On the other hand, workers with more experience are more productive in the same proportion that they earn more in medium and large firms, meaning they are fully compensated for their higher productivity. Finally, workers in micro and small firms are paid more than what their productivity would merit. Training benefits firms and employees since it significantly increases workers' productivity and their earnings.

JEL Classification: J31, J71, J81

Suggested Citation

Lopez-Acevedo, Gladys and Tinajero, Monica and Rubio, Marcela, Mexico: Human Capital Effects on Wages and Productivity (December 2005). World Bank Policy Research Working Paper No. 3791, Available at SSRN: https://ssrn.com/abstract=874093

Gladys Lopez-Acevedo (Contact Author)

Lead Economist ( email )

1818 H Street
Washington, DC 20433
United States

HOME PAGE: http://www.worldbank.org/en/about/people/gladys-lopez-acevedo

Monica Tinajero

World Bank

1818 H Street, N.W.
Washington, DC 20433
United States

Marcela Rubio

World Bank ( email )

1818 H Street, N.W.
Washington, DC 20433
United States