March 18, 2003

Notes: Gordon Hanson on Mexico

More information on how NAFTA has been (primarily) a blessing and (secondarily) a curse to Mexico...


What Has Happened to Wages in Mexico since NAFTA? | Gordon H. Hanson | NBER Working Paper No. w9563 | Issued in March 2003

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 1980s. 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. I discuss implications of Mexico's experience for the rest of Latin America in the event a Free Trade Agreement of the Americas is enacted.

Posted by DeLong at March 18, 2003 09:52 AM | TrackBack

Comments

“There is, however, little evidence of wage convergence between the two countries. Regional wage differentials in Mexico have widened...”

Somebody is obviously a bit too concerned with the dilemma of inequality. He probably has read more than his share of Karl Marx and John Rawls. I never expected the wage convergence between the United States and Mexico to be entirely equal at this time. Unsurprisingly, I did indeed think that there might be wide differences in Mexico’s “regional wage differentials (wow, I just love this macroeconomic jargon).” The main thing is that the latter country’s economy is improving---and this wouldn’t have occurred without NAFTA. Bill Clinton deserves a lot of credit.

Posted by: David Thomson on March 18, 2003 02:09 PM

"Bill Clinton deserves a lot of credit"

I give you credit DT. I didn't think you were capable of typing the words.

Posted by: Dan on March 18, 2003 02:24 PM

“I give you credit DT. I didn't think you were capable of typing the words.”

I have always praised Bill Clinton for saving lives in the Balkans. He also showed more guts on trade issues than Bush has up to now---and I’ve said so a number of times on this blog. And I believe that Clinton has a higher I.Q. than does George W. Bush. It is therefore a tragedy than the former President squandered his gifts due to his inability to impose self discipline on himself. I did my best to warn Conservatives that their blind hatred for Clinton was backfiring. Needless to add, few listened to me.

I well remember an article about a guy hired in Washington. DC (long before the Monica Lewinsky fiasco) whose only purpose in life was to fax off information to the media blasting President Clinton. After all, one has to understand that salaries and rented space are very expensive in the national capitol. This seemed downright weird to me and common sense dictated that I was not alone in reaching this conclusion. Unfortunately, the Clinton haters didn't see that their train was running off the track.

Posted by: David Thomson on March 18, 2003 06:26 PM

"Unfortunately, the Clinton haters didn't see that their train was running off the track."

I'm not sure what you mean. The Clinton haters are running the whole damn country!

Posted by: Dan on March 18, 2003 07:02 PM

Hmm... my impression from the abstract, at least, is that inequality is just one of several things looked at in the paper. I think that looking only at the issues of inequality is bad for economists (except, of course, if you're an economist whose specialization is in the field of income inequality, in which case that's what you study, teach, and model for a living...), but when giving an overview of the affects of a policy, there's no reason not look at it as one of many factors.

Unless I completely misinterpreted the abstract, that is.

Posted by: Julian Elson on March 19, 2003 05:43 PM

Somewhat off the subject. Brad, if you look here before you look at Argmax, Rogoff has said the IMF has mostly failed client countries, where "collapse in growth rates and significant financial crises" are often suffered, with floating fx regimes "amplify(ing) the effects of various shocks." So Stiglitz was right?

Press report on
http://portal.telegraph.co.uk/money/main.jhtml;$sessionid$Z0EA1EK3EGAKZQFIQMFSFGGAVCBQ0IV0?xml=/money/2003/03/20/cnimf20.xml&sSheet=/portal/2003/03/20/ixportal.html

Posted by: K Harris on March 20, 2003 05:00 AM
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