Local labor markets and wage inequality in Mexico

Using data from the Urban Employment Survey for the 1988-1999 period, this paper shows an increasing wage inequality in Mexico during the 90s. The paper analyzes the trend of 3 different inequality measures in 16 different local labor markets and shows that the risign Mexican wage inequality is concentrated in the southern and central cities, while northern cities seem to have experienced significant wage inequality drops. Using the variability in the inequality measures at a local level, the analysis combines cross section and time series data to understand the role local demographic, industrial and economic characteristics have played in the rising inequality. Local economic activity, employment in the service sector, and occupational opportunities for executives seem to be positively correlated with risign wage inequality, while more agricultural employment and occupational opportunities for mildly educated workers seem to be negatively correlated with it.