Mexican real wages and the U.S. economy

This article examines real wage determinants from 1996 to 2014 across Mexican states. Real wages are determined in equilibrium by combining labor supply (years of education and population growth) and labor demand (mostly external factors) forces. Panel data models provide two main results. First, years of education and U.S. real GDP appear to be reliable predictors of wages in fixed effects models, with very marked changes after the U.S. 2008-2009 financial crisis and stronger effects on northern Mexican states. Second, dynamic panels confirm the role of foreign forces: positive from the U.S. economy and negative from the real exchange rate.