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Title: Rising College Premiums in Mexico: How Important Is Trade?

Citation Type: Miscellaneous

Publication Year: 2010

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Abstract: The literature on wage inequality in liberalizing developing economies has largely attributedrising skill premiums to trade-induced increases in the demand for skilled labor within"sectors" (industries, occupations, or industry-occupation pairs). Although there is strong evidencefrom many countries of trade-induced increases in skill demand within manufacturing, weshow that in Mexico, the most studied country in this literature, economy-wide increases incollege premium can be explained without reference to these demand shifts. Evidence that skillpremiums have increased because of within-sector increases in skill demand mostly comes fromdecompositions that suppress dierences in wages across occupations. We show that this isunduly restrictive, for example if incomes change and Engel curves for services are non-linear.Mexicos college premiums were lifted by increased demand for professional services, manyof which are not directly tradeable. This explanation also reconciles gender dierences in thechanges in skill premium with changes in employment composition. Job opportunities in nontradedsectors may matter more for wage inequality than trade policy. [JEL: F16, O15, J21]

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Authors: Acuna, Belinda; Mehta, Aashish

Publisher: UC Santa Barbara

Data Collections: IPUMS International

Topics: Labor Force and Occupational Structure

Countries: Mexico