EFFECT OF NAFTA ON MEXICO´S WAGE INEQUALITY

Martha Rodriguez-Villalobos; Antonio Julián-Arias; Alejandro Cruz-Montaño

doi:10.20472/ES.2019.8.1.009

Authors

Martha Rodriguez-Villalobos Universidad de Monterrey, Mexico Author
Antonio Julián-Arias Universidad de Monterrey, Mexico Author
Alejandro Cruz-Montaño Universidad de Monterrey, Mexico Author

DOI:

https://doi.org/10.20472/ES.2019.8.1.009

Keywords:

Wage inequality, Income distribution, Occupational analysis, Sectorial analysis, NAFTA, Fixed effects

Abstract

One of the expected benefits of the North American Free Trade Agreement (NAFTA) was the reduction of wage disparities through increased productivity. This study measures the effect of demographic, labor, and sectoral variables on wage inequality in Mexico over the period 1988–2017, as well as the impact of NAFTA accession. Using a fixed effects model, the results show that an increase in the proportion of workers employed in the service and agricultural sectors contributes to a widening wage gap. Similarly, individuals in managerial positions earn relatively higher wages than the average, further increasing inequality. Contrary to initial expectations, NAFTA has contributed to an increase in wage differentials in Mexico, and these disparities have remained relatively stable over time, leading to proposals for adjustments to the minimum wage.

Data:
Received: 17 Mar 2019
Revised: 12 May 2019
Accepted: 6 Jun 2019
Published: 20 Jun 2019