Tracking Wage Inequality Trends with Prices and Different Trade Models : Evidence from Mexico

Mexican wage inequality rose following Mexicos accession to the General Agreement on Tariffs and Trade/World Trade Organization in 1986. Since the mid-1990s, however, wage inequality has been falling. Since most trade models suggest that output pri...

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Main Authors:	Halliday, Timothy, Lederman, Daniel, Robertson, Raymond
Format:	Working Paper
Language:	English en_US
Published:	World Bank, Washington, DC 2015
Subjects:	TARIFFS FREE TRADE AGREEMENT IMPERFECT SUBSTITUTES PRODUCTION SKILLED WORKERS INDIVIDUAL FIRMS SALES INCOME INTEREST CONSUMER PRICE INDICES MINCERIAN WAGE EQUATIONS EXCHANGE TARIFF CHANGES EXPORTS DEVELOPING COUNTRIES DOMESTIC MARKET MARGINAL PRODUCT POLITICAL ECONOMY EXPORT PRICES PRICE INDICES ECONOMIC EFFECTS INTERNATIONAL TRANSPORTATION DEVALUATION EQUILIBRIUM EQUAL SHARE DISTRIBUTION VARIABLES TRADE REFORMS DOMESTIC PRICE MARGINAL PRODUCTIVITY TRADE OPENNESS PRICE INPUTS PRODUCT QUALITY RETURNS TO SCALE FREE TRADE TRENDS FOREIGN MARKETS LABOR MARKET TOTAL FACTOR PRODUCTIVITY SAVINGS PRODUCTION STRUCTURE COSTS DEVELOPMENT ECONOMICS EXCHANGE RATE MOVEMENTS EXOGENOUS VARIABLES DOMESTIC PRODUCERS TARIFF REDUCTION FIXED COSTS SURPLUS PRODUCTS PRODUCTIVITY GLOBALIZATION CRITERIA MARKETS WTO OPEN ECONOMY TRADE MODELS INTERNATIONAL ECONOMICS PRICE SERIES IMPORTS PRODUCT UTILITY TRADE AGREEMENT EXPORT MARKET SUBSTITUTES LIBERALIZATION ECONOMIC RESEARCH MARKET PRICE POWER PARITY GENERAL AGREEMENT ON TARIFFS EXPENDITURE TRADE MODEL UNEMPLOYMENT CONSUMPTION GENERAL EQUILIBRIUM HUMAN CAPITAL TECHNOLOGICAL CHANGE SUBSTITUTE WAGES DOMESTIC MARKETS VALUE FOREIGN DIRECT INVESTMENT PURCHASING POWER DEMAND TRADE REFORM DOMESTIC SALES DEMAND FUNCTION IMPORT COMPETITION FACTOR PRICES CONSUMER PRICE PRICE CHANGES CONSUMERS
Online Access:	http://documents.worldbank.org/curated/en/2015/11/25249909/tracking-wage-inequality-trends-prices-different-trade-models-evidence-mexico http://hdl.handle.net/10986/23440

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spelling	okr-10986-234402021-04-23T14:04:15Z Tracking Wage Inequality Trends with Prices and Different Trade Models : Evidence from Mexico Halliday, Timothy Lederman, Daniel Robertson, Raymond TARIFFS FREE TRADE AGREEMENT IMPERFECT SUBSTITUTES PRODUCTION SKILLED WORKERS INDIVIDUAL FIRMS SALES INCOME INTEREST CONSUMER PRICE INDICES MINCERIAN WAGE EQUATIONS EXCHANGE TARIFF CHANGES EXPORTS DEVELOPING COUNTRIES DOMESTIC MARKET MARGINAL PRODUCT POLITICAL ECONOMY EXPORT PRICES PRICE INDICES ECONOMIC EFFECTS INTERNATIONAL TRANSPORTATION DEVALUATION EQUILIBRIUM EQUAL SHARE DISTRIBUTION VARIABLES TRADE REFORMS DOMESTIC PRICE MARGINAL PRODUCTIVITY TRADE OPENNESS PRICE INPUTS PRODUCT QUALITY RETURNS TO SCALE FREE TRADE TRENDS FOREIGN MARKETS LABOR MARKET TOTAL FACTOR PRODUCTIVITY SAVINGS PRODUCTION STRUCTURE COSTS DEVELOPMENT ECONOMICS EXCHANGE RATE MOVEMENTS EXOGENOUS VARIABLES DOMESTIC PRODUCERS TARIFF REDUCTION FIXED COSTS SURPLUS PRODUCTS PRODUCTIVITY GLOBALIZATION CRITERIA MARKETS WTO OPEN ECONOMY TRADE MODELS INTERNATIONAL ECONOMICS PRICE SERIES IMPORTS PRODUCT UTILITY TRADE AGREEMENT EXPORT MARKET SUBSTITUTES LIBERALIZATION ECONOMIC RESEARCH MARKET PRICE POWER PARITY GENERAL AGREEMENT ON TARIFFS EXPENDITURE TRADE MODEL UNEMPLOYMENT CONSUMPTION GENERAL EQUILIBRIUM HUMAN CAPITAL TECHNOLOGICAL CHANGE SUBSTITUTE WAGES DOMESTIC MARKETS VALUE FOREIGN DIRECT INVESTMENT PURCHASING POWER DEMAND TRADE REFORM DOMESTIC SALES DEMAND FUNCTION IMPORT COMPETITION FACTOR PRICES CONSUMER PRICE PRICE CHANGES CONSUMERS Mexican wage inequality rose following Mexicos accession to the General Agreement on Tariffs and Trade/World Trade Organization in 1986. Since the mid-1990s, however, wage inequality has been falling. Since most trade models suggest that output prices can affect factor prices, this paper explores the relationship between output prices and wage inequality. The rise of inequality can be explained by the evolution of the relative price of skill-intensive goods relative to unskilled-intensive goods, but these prices flattened by 1999 and thus cannot explain the subsequent decline in wage inequality. An alternative trade model with firm heterogeneity driven by variations in the relative price of tradable relative to non-tradable goods can explain the decline in wage inequality. The paper compares this model’s predictions with Mexican inequality statistics using data on output prices, census data, and quarterly household survey data. In spite of the models simplicity, the model’s predictions match Mexican variables reasonably well during the years when wage inequality fell. 2015-12-18T19:18:27Z 2015-12-18T19:18:27Z 2015-11 Working Paper http://documents.worldbank.org/curated/en/2015/11/25249909/tracking-wage-inequality-trends-prices-different-trade-models-evidence-mexico http://hdl.handle.net/10986/23440 English en_US Policy Research Working Paper;No. 7471 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research Mexico
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English en_US
topic	TARIFFS FREE TRADE AGREEMENT IMPERFECT SUBSTITUTES PRODUCTION SKILLED WORKERS INDIVIDUAL FIRMS SALES INCOME INTEREST CONSUMER PRICE INDICES MINCERIAN WAGE EQUATIONS EXCHANGE TARIFF CHANGES EXPORTS DEVELOPING COUNTRIES DOMESTIC MARKET MARGINAL PRODUCT POLITICAL ECONOMY EXPORT PRICES PRICE INDICES ECONOMIC EFFECTS INTERNATIONAL TRANSPORTATION DEVALUATION EQUILIBRIUM EQUAL SHARE DISTRIBUTION VARIABLES TRADE REFORMS DOMESTIC PRICE MARGINAL PRODUCTIVITY TRADE OPENNESS PRICE INPUTS PRODUCT QUALITY RETURNS TO SCALE FREE TRADE TRENDS FOREIGN MARKETS LABOR MARKET TOTAL FACTOR PRODUCTIVITY SAVINGS PRODUCTION STRUCTURE COSTS DEVELOPMENT ECONOMICS EXCHANGE RATE MOVEMENTS EXOGENOUS VARIABLES DOMESTIC PRODUCERS TARIFF REDUCTION FIXED COSTS SURPLUS PRODUCTS PRODUCTIVITY GLOBALIZATION CRITERIA MARKETS WTO OPEN ECONOMY TRADE MODELS INTERNATIONAL ECONOMICS PRICE SERIES IMPORTS PRODUCT UTILITY TRADE AGREEMENT EXPORT MARKET SUBSTITUTES LIBERALIZATION ECONOMIC RESEARCH MARKET PRICE POWER PARITY GENERAL AGREEMENT ON TARIFFS EXPENDITURE TRADE MODEL UNEMPLOYMENT CONSUMPTION GENERAL EQUILIBRIUM HUMAN CAPITAL TECHNOLOGICAL CHANGE SUBSTITUTE WAGES DOMESTIC MARKETS VALUE FOREIGN DIRECT INVESTMENT PURCHASING POWER DEMAND TRADE REFORM DOMESTIC SALES DEMAND FUNCTION IMPORT COMPETITION FACTOR PRICES CONSUMER PRICE PRICE CHANGES CONSUMERS
spellingShingle	TARIFFS FREE TRADE AGREEMENT IMPERFECT SUBSTITUTES PRODUCTION SKILLED WORKERS INDIVIDUAL FIRMS SALES INCOME INTEREST CONSUMER PRICE INDICES MINCERIAN WAGE EQUATIONS EXCHANGE TARIFF CHANGES EXPORTS DEVELOPING COUNTRIES DOMESTIC MARKET MARGINAL PRODUCT POLITICAL ECONOMY EXPORT PRICES PRICE INDICES ECONOMIC EFFECTS INTERNATIONAL TRANSPORTATION DEVALUATION EQUILIBRIUM EQUAL SHARE DISTRIBUTION VARIABLES TRADE REFORMS DOMESTIC PRICE MARGINAL PRODUCTIVITY TRADE OPENNESS PRICE INPUTS PRODUCT QUALITY RETURNS TO SCALE FREE TRADE TRENDS FOREIGN MARKETS LABOR MARKET TOTAL FACTOR PRODUCTIVITY SAVINGS PRODUCTION STRUCTURE COSTS DEVELOPMENT ECONOMICS EXCHANGE RATE MOVEMENTS EXOGENOUS VARIABLES DOMESTIC PRODUCERS TARIFF REDUCTION FIXED COSTS SURPLUS PRODUCTS PRODUCTIVITY GLOBALIZATION CRITERIA MARKETS WTO OPEN ECONOMY TRADE MODELS INTERNATIONAL ECONOMICS PRICE SERIES IMPORTS PRODUCT UTILITY TRADE AGREEMENT EXPORT MARKET SUBSTITUTES LIBERALIZATION ECONOMIC RESEARCH MARKET PRICE POWER PARITY GENERAL AGREEMENT ON TARIFFS EXPENDITURE TRADE MODEL UNEMPLOYMENT CONSUMPTION GENERAL EQUILIBRIUM HUMAN CAPITAL TECHNOLOGICAL CHANGE SUBSTITUTE WAGES DOMESTIC MARKETS VALUE FOREIGN DIRECT INVESTMENT PURCHASING POWER DEMAND TRADE REFORM DOMESTIC SALES DEMAND FUNCTION IMPORT COMPETITION FACTOR PRICES CONSUMER PRICE PRICE CHANGES CONSUMERS Halliday, Timothy Lederman, Daniel Robertson, Raymond Tracking Wage Inequality Trends with Prices and Different Trade Models : Evidence from Mexico
geographic_facet	Mexico
relation	Policy Research Working Paper;No. 7471
description	Mexican wage inequality rose following Mexicos accession to the General Agreement on Tariffs and Trade/World Trade Organization in 1986. Since the mid-1990s, however, wage inequality has been falling. Since most trade models suggest that output prices can affect factor prices, this paper explores the relationship between output prices and wage inequality. The rise of inequality can be explained by the evolution of the relative price of skill-intensive goods relative to unskilled-intensive goods, but these prices flattened by 1999 and thus cannot explain the subsequent decline in wage inequality. An alternative trade model with firm heterogeneity driven by variations in the relative price of tradable relative to non-tradable goods can explain the decline in wage inequality. The paper compares this model’s predictions with Mexican inequality statistics using data on output prices, census data, and quarterly household survey data. In spite of the models simplicity, the model’s predictions match Mexican variables reasonably well during the years when wage inequality fell.
format	Working Paper
author	Halliday, Timothy Lederman, Daniel Robertson, Raymond
author_facet	Halliday, Timothy Lederman, Daniel Robertson, Raymond
author_sort	Halliday, Timothy
title	Tracking Wage Inequality Trends with Prices and Different Trade Models : Evidence from Mexico
title_short	Tracking Wage Inequality Trends with Prices and Different Trade Models : Evidence from Mexico
title_full	Tracking Wage Inequality Trends with Prices and Different Trade Models : Evidence from Mexico
title_fullStr	Tracking Wage Inequality Trends with Prices and Different Trade Models : Evidence from Mexico
title_full_unstemmed	Tracking Wage Inequality Trends with Prices and Different Trade Models : Evidence from Mexico
title_sort	tracking wage inequality trends with prices and different trade models : evidence from mexico
publisher	World Bank, Washington, DC
publishDate	2015
url	http://documents.worldbank.org/curated/en/2015/11/25249909/tracking-wage-inequality-trends-prices-different-trade-models-evidence-mexico http://hdl.handle.net/10986/23440
_version_	1764453851942879232

Tracking Wage Inequality Trends with Prices and Different Trade Models : Evidence from Mexico

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