Wage Convergence : The case of Mexico and the United States of America as a result of the North American Free Trade Agreement

• Main Authors: Deva, Saloni, Sondefors, Tobias
• Format: Others
• Language: English
• Published: Högskolan i Jönköping, Internationella Handelshögskolan 2008
• Subjects: Wage convergence; the North American Free Trade Agreement; Foreign Direct Investment; Economics; Nationalekonomi
• Online Access: http://urn.kb.se/resolve?urn=urn:nbn:se:hj:diva-1608

As discussed in the factor-price equalization theorem, prices, and thus wages, tend to equalize as a result of trade between two countries. The focus of this thesis is to perform a time series regression in order to evaluate whether wage convergence has taken place between Mexico and the United Sates of America due to the establishment of the North America Free Trade Agreement (NAFTA) in 1994. The authors of this thesis conclude that wage convergence did take place between the two countries in question, since the slopes found using the regression are mostly positive, indicating an increasing real wage ratio between Mexico and the United States of America.