Globalization, Regional Wage Differentials and the Stolper-Samuelson Theorem: Evidence from México.
Using individual-level data on personal characteristics and wages and state-level data on trade, foreign direct investment, international migration and other site-specific features, I study what factors determined the changes in Mexico's regional wage differentials between 1990 and 2000. I exploit the regional variation in the exposure to globalization to identify the effects of NAFTA on wages and on returns to schooling. The results support the presence of Stolper-Samuelson type of responses during Mexico's globalization process: regions more exposed to international markets appear to have exhibited an increase in wage levels, but a decrease in returns to schooling, relative to other regions of the country. The results suggest that globalization has an important spatial dimension that is usually neglected in traditional trade models.
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