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Trade and Wages: Two Puzzles from Mexico
Author(s) -
Robertson Raymond
Publication year - 2007
Publication title -
world economy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.594
H-Index - 68
eISSN - 1467-9701
pISSN - 0378-5920
DOI - 10.1111/j.1467-9701.2007.01048.x
Subject(s) - wage inequality , economics , wage , free trade , inequality , international economics , liberalization , developing country , international trade , labour economics , economic growth , market economy , mathematical analysis , mathematics
Mexico plays an important role in the developing‐country trade‐liberalisation literature because it liberalised early and extensively. Numerous papers analysed changes in Mexican wage levels and inequality after Mexico joined the GATT in 1986. This paper reviews recent papers that analyse changes in wage levels and inequality since the North American Free Trade Agreement in 1994. Two main puzzles emerge. First, wage growth rates are similar before and after NAFTA. Second, Mexican wage inequality, which received much attention after its post‐GATT rise, falls steadily after NAFTA. This paper reviews several possible explanations for these two phenomena.