Tracking wage inequality trends with prices and different trade models: evidence from Mexico Academic Article uri icon

abstract

  • 2017, Kiel Institute. 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. A SalterSwan 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 models predictions with Mexican inequality statistics using data on output prices, census data, and quarterly household survey data. In spite of the models simplicity, the models predictions match Mexican variables reasonably well during the years when wage inequality fell.

published proceedings

  • Review of World Economics

author list (cited authors)

  • Halliday, T., Lederman, D., & Robertson, R.

citation count

  • 1

complete list of authors

  • Halliday, Timothy||Lederman, Daniel||Robertson, Raymond

publication date

  • February 2018