Zadia M. Feliciano

Workers and Trade Liberalization: The Impact of Trade Reforms in Mexico on Wages and Employment

Between 1986 and 1990, the Mexican government reduced tariffs and import license coverage by more than 50%. The author, using micro-level data, analyzes the impact of trade reform on Mexican wages and employment. Industries that had greater reductions in protection levels, she finds, had a larger percentage of low-skill workers. Wage dispersion increased in both the non-tradables sector and, to a much greater degree, the tradables sector. This pattern suggests that trade reform increased wage inequality. The decline in import license coverage appears to have reduced relative wages of workers in reformed industries by 2%, but did not affect relative employment. Reductions in tariffs had no statistically significant effect on relative wages or relative employment.

EU accession and foreign-owned firms in Bulgaria

ABSTRACT Bulgaria signed the European Union accession treaty in 2005. Accession caused an increase in the volume of inward foreign direct investment flows (IFDI). We analyse World Bank BEEPS firm-level data for 2007 to understand the characteristics and performance of foreign firms in Bulgaria. Regression analysis reveals that foreign firms are larger, have lower capital-to-labour ratios, are more likely to export and are more likely to locate in Sofia. However, foreign firms have had limited success in Bulgaria. They do not exhibit higher sales growth and, in manufacturing, carried out lower capital investment in machinery than domestic firms. The numbers of visits from tax officials is the same for domestic and foreign firms in manufacturing, and lower for foreign firms in the service sector. However, firms with higher exports-to-sales ratios and higher absolute sales were subjected to a higher number of visits from tax officials. These findings suggest that a range of institutional challenges remain for foreign firms in Bulgaria.