fluctuated wildly – in 2007 it stood roughly at the same level as in 2001. These patterns are consistent with a volatile, but roughly constant relative demand for skilled labor over this period. The evolution of the high school-dropout wage premium and relative supply in Table 3.2, in turn, signals the presence of substantial demand forces for this middle education group for the two decades, since despite large increases in the relative supply the wage differential fell relatively little.

The evolution of supplies and premiums from Honduras reveal a great deal of volatility, in part due to changes in the underlying household survey. Table 3.1 shows that the relative supply for skilled labor increased over the two decades, with virtually no change in the wage skill premium in the 1990s indicating a relative demand for skilled labor growing at the same rate as its relative supply. In the 2000s, however, the fall in the wage premium is consistent with a slow or even decreasing relative demand for this factor. Table 3.2, meanwhile, indicates that the high school-dropout wage differential fell by 1.8 percent per year over the decade of 1990, with a small concurrent increase in its relative supply over the same period. For the decade of 2000, the corresponding wage premium only exhibits a small increase, but with a substantially larger reduction in the relative supply of high school graduates. Both patterns are consistent with a decrease in the relative demand for this type of labor over the two periods. It should be noted that this fall in the relative supply of high school graduates is one of the few observed for the countries and periods under analysis.

Table 3.1 and the evolution of the underlying variables (see the Appendix below) indicates that the wage premium increased substantially in Mexico in the late 1980s and early 1990s, even when ignoring the hike around 1995 (the “Tequila” financial crisis). The fall in the wage premium that characterized most of the Latin American economies in the 2000s started in Mexico a few years earlier, in the late 1990s, and accelerated in the next decade. The increase in the relative supply of skilled labor was strong throughout the whole period, especially in the 1990s. The increase in the wage premium and the relative supply of skilled labor in the 1990s is consistent with a strong increase in its relative demand.<sup>26</sup> On the other hand, the assumed elasticities of substitution indicate that the fall in the wage premium during the decade of 2000 and the deceleration in the growth of its relative supply call for a reduction in the relative demand of skilled labor in this decade. When studying the underlying trends within unskilled workers, there was a substantial increase in the relative supply of high school graduates (of about 4.6 percent a year on average) during the 1990s, with a corresponding fall in the relative wage premium for this group (with respect to those with no secondary degree) of -1.5 percent. The following decade (2000-2008), however, is marked by the stagnation (a small fall) in the relative supply of workers from the high school group, accompanied also by reduction in its wage differential. This pattern is consistent with the presence of negative relative demand forces for this factor during the 2000s.

Nicaragua has carried out few national household surveys in the last two decades, although these sources are comparable and allow the construction of a coherent story. The results in Table 3.1 indicate that the relative supply of skilled labor strongly rose over the two decades, starting from very low levels. The conditional wage gap between skilled and unskilled labor increased sharply in the 1990s, and then fell in the 2000s. These movements are consistent with a strong increase in the relative demand for skilled labor in Nicaragua in the 1990s and a subsequent fall in the 2000s. The country also experienced a substantial increase in the relative supply of high school workers, of 2.1

> 26 Montes Rojas (2006) carries out a similar type of analysis for Mexico and shares this conclusion.

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