Returns to schooling and skills in Mexico: a heterogeneous market

Abstract

The characteristics of the Mexican labor market are changing. On the one hand, the population is increasingly educated, which means that skilled workers are less scarce. On the other hand, occupations are shifting requirements, giving greater weight to skills. The objective of this work is to estimate the returns to schooling and skills in different occupational markets. The present thesis estimates the returns to schooling and skills (cognitive and physical). For this purpose, the present work uses a model of endogenous factors with self-selection, inspired by Roy’s model to compare returns across occupations and between genders. Both schooling and skills are found to have a significant effect on wages. In addition, there is evidence that people self-select in the market that presents higher returns to the skills they posses. Results indicate that wage premiums from schooling or skills are heterogeneous between genders and occupations, which should be accounted for in future estimations on returns.