Endogenous Skill Acquisition and Export Manufacturing in Mexico

Author(s): 
Atkin, David
Organization/Affiliation(s): 
Yale University
Resource Type: 
Publication Date: 
Aug, 2010

Studies based on firm-level data find that both exporting firms and multinational corporations pay higher wages for a given skill level. However, the literature overlooks the fact that export manufacturing firms may also change the educational choices of the workforce. In this paper, I confirm that for Mexico during the period 1986-2000, the export sector pays higher wages than other sectors, but school drop out increases with the arrival of new export jobs. By the year 2000, the workers induced to enter export manufacturing are earning less than they would have earned had the jobs never appeared and they stayed in school longer. I identify the causal effects by looking within municipalities and examining how the education of different cohorts varies with new factory openings in the municipality at key school-leaving ages. Export manufacturing attracts students by paying high relative wages for unskilled workers, and offering many jobs to low-skill workers straight out of school. The magnitudes I find suggest that for every ten new jobs created, one student drops out of school at grade 9 rather than continuing on through grade 12.

Topic: 
Workforce Development
Regions: 
Latin America & the Caribbean
Tags: 
Education
Unemployment