This paper exploits the Mexican Encuesta Nacional de Empleo Urbano (ENEU) to determine the existence of the wage curve—an empirical phenomena first suggested by Blanchflower and Oswald (1990)—during the period 2000–2003. We propose an innovative approach to the wage curve by estimating the elasticity across the wage distribution. This is applied to the Mexican experience during the early 2000s recession.
The evidence indicates that for Mexico during this period there is no wage curve, and that wages are positively affected by local levels of unemployment. This lends credibility to the Harris and Todaro (1970) view which suggests that there is segmentation in the labour market with residual unemployment. We argue that perhaps the power
of unions may account for our findings
