Abstract

In this paper we analyse the recent evolution and determinants of real wages in Mexico’s manufacturing sector, using theories based on the assumption of imperfect competition both in the product and in the labour markets, especially wage-bargain theory, insider-outsider and mark-up models. We show evidence that the Mexican labour market does not behave as a traditional competitive market. The proposed explanation for this fact is that some workers benefit from advantages when compared with others, so that they can get a greater share of the proceedings of the productive process. Also, we find that changes in the degree of competition in the market for output influence the behaviour of real wages.

Highlights

  • During the last quarter of century the Mexican economy has lived through different stages

  • Using annual information for Mexico over a period of 11 years, and a panel dataset, we have studied the factors that account for the evolution of manufacturing real wages in Mexico, taking into account that market imperfections are an important feature of both product and labour markets in Mexico’s manufacturing sector

  • In the first place, strong persistence of wage determination, which point out to the importance of the recent past in explaining the evolution of real manufacturing wages

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Summary

Introduction

During the last quarter of century the Mexican economy has lived through different stages. Rapid growth lasted until the beginning of the new century, when it came to a halt in unison with the end of the US economic boom. During these stages the labour market has undergone drastic changes, Brazilian Journal of Political Economy 26 (3), 2006 and the main objective of this paper is to analyse one particular aspect of the labour market, namely the evolution and determinants of real wages in the manufacturing sector, during the last stage of Mexico’s evolution.

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