Abstract
The wage premium between skilled and unskilled workers in Mexican maquiladoras has increased, from nearly 2 times in 1981 to nearly 4 or 5 times in 2006, depending on the sector. This increase favoring skilled workers is examined against relative labor supplies within a class of models estimated by dynamic panel methods. Adapting a conventional model of the skill premium to labor supply, we find strong productivity effects. Higher productivity at the maquiladora industry (assumed either exogenous or endogenous to the wage premium) or higher U.S. GDP per worker (exogenous to the industry) are shown to have positive effects on the wage premium. The elasticity of wages to relative labor supply is very stable, implying strong substitution of labor types. We find, however, evidence of structural breaks in the basic model around the start of the North American Free Trade Agreement in 1994 and 1995.
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