Employment Responses of Skilled and Unskilled Workers at Mexican Maquiladoras: The Effects of External Factors

SummaryThis paper compares a standard labor demand model to another augmented by the real exchange rate (RER) when studying the growth of dynamic Mexican maquiladoras from 1990 to 2006. The basic question is whether the real value of the peso changes the responses of employment to wages and to capital. In the augmented models, skilled labor employment becomes very sensitive to its own wages. Also, the user cost of capital has a larger negative impact on skilled employment, and a weaker currency has a negative impact on unskilled employment only. Overall, skilled labor benefits relatively more under globalization.