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The Returns to Wages for Mexican Workers in a Post NAFTA World: Has the Gap in Returns to Wages Grown Between Mexican Workers in the U.S. and their Domestic Counterparts?

By Ross Hanig


I test to see if the returns to wages for Mexican workers have changed in the Pre- and Post-NAFTA periods using data from the Mexican Migration Project using a pseudo panel analysis framework. The results here suggest that the returns to wages for workers in Mexico have declined significantly in the Post-NAFTA period. However, due to severe measurement error in the data on wages earned in Mexico, and consequently insufficient data to provide suitable cohort sizes, the results here should be viewed as suggestive rather than inferential. I present several tables at the end of the paper with similar regression results from the INEGI data set which do not suffer these problems in measurement error and will form the basis for a significantly updated draft of this paper to be presented at the AAEA conference. The INEGI results suggest the workers in Mexico may actually have not been made significantly worse off from NAFTA. However, the coefficient for workers in the agricultural sector declines, suggesting this sector may have incurred significant losses in wage-returns. These latter results appear consistent with the other work finding that at best, NAFTA may have had an insignificant impact on Mexican wages. The updated version of this paper will present cross-sectional as well as pseudo-panel findings with cohorts grouped by five-year birth spans, gender, and educational attainment to better account for the generational effects and endogeneity with fixed effects.Labor and Human Capital,

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