Fairness and Wages in Mexico's Maquiladora Industry: An Empirical Analysis of Labor Demand and the Gender Wage Gap

Abstract

In 2001, China's entry into the World Trade Organization (WTO) and the US recession put pressure on maquiladora workers' wages. The result was an increase in the gender wage gap. At the firm level, this increase is not discriminatory, in the sense that the lower income entitlement for women is socially accepted at the household level. This paper uses Akerlof and Yellen's (1990) fair wage–effort hypothesis to explain the gender wage gap as a matter of “fair-wage constraints” that differ across genders, which are, in turn, due to evolving social norms of fairness in reservation wages for men and women within households. Empirical evidence for changes in gender wages gaps across industries between 1997 and 2006 is found to be consistent with this argument.

Keywords:

• fairness
• wages
• gender
• maquiladora industry

Acknowledgements

This paper was presented at the 2009 ASE meeting in San Francisco. I am grateful to Malcolm Sawyer and two anonymous referees for numerous comments on previous drafts of this paper. I am solely responsible for all remaining errors.

Notes

1 The maquiladora industry consists of wholly foreign-owned or Mexican-owned subsidiary plants, mainly on the Mexican border, for the assembly, processing, and finishing of duty-free foreign materials and components into products for export essentially towards the USA.

2 For interesting insights on working conditions and related political issues in this industry see Sklair (1989).

3 The rates were similar for countries with a strong Catholic tradition, particularly across Latin America.

4 See Appendix Table 7 for a full definition of workers and technicians.

5 Standard errors are in brackets with * and ** for the coefficient being significant at the 5 percent and 10 percent level, respectively.