Essays on economic adjustments in post-reform Mexico

Abstract

This dissertation consists of three empirical essays on the economic adjustments that followed trade liberalization and other market-oriented reforms in Mexico during the 1980s and 1990s. In the first essay, I use micro data from the Mexican Population Census to explain the recent reversal in economic convergence between Mexican states. I decompose the divergence into components due to economy-wide changes in skill prices and components due to state-specific changes in the composition of workers. I find that the rise in the education premium hindered the progress of poor states and raised the variance of average state wages. However, educational attainment mostly compensated for this income widening effect. State-level regressions reveal that initial level of education, size of the agricultural sector, and distance to the U.S. border were important factors while public infrastructure was not. In the second essay, I use Mexican Income-Expenditure Surveys to examine relative wages and employment of women in Mexico during the trade liberalization period. The gender wage gap was relatively stable during 1989--2000 while the relative supply of women increased, suggesting that relative demand for women also increased. I find that industrial change, such as the decline of agriculture and the expansion of services and light manufacturing, moved in favor of women. Using state-level data, I find that the wage bill share of women is negatively related to agricultural employment and positively related to maquiladora employment, a proxy for foreign direct investment. In the third essay, I use micro data from the Mexican Population Census to study the effects of trade liberalization and domestic reforms on rural-urban migration in Mexico. To take better advantages of the new rules of international trade, a new agrarian law gave property rights to communal farmers. At the same time, tariff and quota protection for agriculture as well as price supports, credits and subsidies to this sector were virtually dismantled. I find that in addition to city-village wage differences and after controlling for self-selection, the share of former communal land within a community has an important positive effect on the probability of individual migration.