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Title: NAFTA and the Value of Mexico-Specific Ethnic Capital
Citation Type: Miscellaneous
Publication Year: 2013
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Abstract: This paper identifi es the e ffect of a bilateral trade shock on the labor market value of ethnic capital specifi c to the trade partner. Speci cally, I examine the eff ect of NAFTA on the labor market outcomes of Mexican descendants in the US. I employ di fference-in-di fference and triple difference techniques using three waves of the US population census. I fi nd that the demand for middle- and high-skilled Mexican descendants increases in the post-NAFTA period, as reflected in their wages and employment in the manufacturing sector. This e ffect mostly comes from industries that increased their trade with Mexico after the implementation of the agreement. The effect seems to be non-linear in regard to trade exposure. For high-skilled individuals, it sets in only after the increase in trade is large enough, while for the middle-skill group, NAFTA's e ffect increases with trade intensifi cation with Mexico. The effect is strongest among management and sales-related occupations, occupations directly involved in information diff usion and transmission, con firming that the observed increases in demand stem from changes in the value of ethnicity-related information. Relative wages of Mexican descendants employed in trade-related occupations grow substantially faster after the implementation of NAFTA, while employment remain constant. Descendants from other Latin American countries are not found to be systematically a ffected by the shock, suggesting that it is inherently Mexico-specific traits that rise in value. The results show that trade effects on wages and employment have an ethnic component. These results suggest that the ethnic capital immigrants bring with them to the host country becomes productive and valuable when the costs to trade between the source and host countries decrease.
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Authors: Surovtseva, Tetyana
Publisher: Universitat Pompeu Fabra
Data Collections: IPUMS USA
Topics: Labor Force and Occupational Structure
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