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Implications for Hemispheric Free Trade



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NBER WORKING PAPER SERIES WHAT HAS HAPPENED TO WAGES IN MEXICO SINCE NAFTA IMPLICATIONS FOR HEMISPHERIC FREE TRADE Gordon H Hanson Working Paper 9563 http www nber org papers w9563 NATIONAL BUREAU OF ECONOMIC RESEARCH 1050 Massachusetts Avenue Cambridge MA 02138 March 2003 I thank Daniel Chiquiar Toni Estevadeordal Bill Maloney Pablo Sanguinetti Alan Taylor and participants at the FTAA and Beyond conferences at Harvard and Punta del Este Uruguay for helpful comments The views expressed herein are those of the author and not necessarily those of the National Bureau of Economic Research 2003 by Gordon H Hanson All rights reserved Short sections of text not to exceed two paragraphs may be quoted without explicit permission provided that full credit including notice is given to the source What Has Happened to Wages in Mexico since NAFTA Implications for Hemispheric Free Trade Gordon H Hanson NBER Working Paper No 9563 March 2003 JEL No F1 J3 ABSTRACT In this paper I examine the impacts of trade and investment liberalization on the wage structure of Mexico Part one of the paper surveys recent literature on the labor market consequences of Mexico s economic reforms in the 1980 s Mexico s policy reforms appear to have raised the demand for skill in the country reduced rents in industries that prior to reform paid their workers high wages and raised the premium paid to workers in states along the U S border These changes have resulted in an increase in wage dispersion in the country Part two of the paper examines changes in Mexico s wage structure during the 1990 s In the last decade Mexico has experienced rising returns to skill which mirror closely wage movements in the United States There is however little evidence of wage convergence between the two countries Regional wage differentials in Mexico have widened and appear to be explained largely by variation in regional access to foreign trade and investment and in regional opportunities for migration to the United States



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