Inequality and Mexico's Labor Market after Trade Reform

The main purpose of this paper is to measure the contributions of the changes in the labor market to the increase in inequality experienced by Mexico after the 1985 trade and financial liberalization. To do so, the paper uses data from Mexican household surveys (Encuesta Nacional de Ingreso Gasto de los Hogares de México) produced by the Mexican Institute for Statistics, Geography and Informatics (Instituto Nacional de Estadística, Geografía e Informática) for 1984 and 1994. The paper applies a counterfactual methodology to measure the effects on inequality of changes in labor force participation, unemployment, structure of employment, and mean labor income by economic sector and education level.