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Why Isn't Mexico Rich?

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  • Gordon H. Hanson

Abstract

Over the last three decades, Mexico has aggressively reformed its economy, opening to foreign trade and investment, achieving fiscal discipline, and privatizing state owned enterprises. Despite these efforts, the country's economic growth has been lackluster, trailing that of many other developing nations. In this paper, I review arguments for why Mexico hasn't sustained higher rates of economic growth. The most prominent suggest that some combination of poorly functioning credit markets, distortions in the supply of nontraded inputs, and perverse incentives for informality creates a drag on productivity growth. These are factors internal to Mexico. One possible external factor is that the country has the bad luck of exporting goods that China sells, rather than goods that China buys. I assess evidence from recent literature on these arguments and suggest directions for future research. (JEL E23, E65, F14, O10, O20, O47)

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Bibliographic Info

Article provided by American Economic Association in its journal Journal of Economic Literature.

Volume (Year): 48 (2010)
Issue (Month): 4 (December)
Pages: 987-1004

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Handle: RePEc:aea:jeclit:v:48:y:2010:i:4:p:987-1004

Note: DOI: 10.1257/jel.48.4.987
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References

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  1. Thorsten Beck & Asli Demirgüç-Kunt & Vojislav Maksimovic, 2005. "Financial and Legal Constraints to Growth: Does Firm Size Matter?," Journal of Finance, American Finance Association, vol. 60(1), pages 137-177, 02.
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  3. Raphael Bergoeing & Patrick J. Kehoe & Timothy J. Kehoe & Raimundo Soto, 2002. "Data Appendix to A Decade Lost and Found: Mexico and Chile in the 1980s," Technical Appendices bergoeing02, Review of Economic Dynamics.
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  6. Chang, Tai Hsieh & Peter, J- Klenow, 2007. "Misallocation and manufacturing TFP in China and India," MPRA Paper 35084, University Library of Munich, Germany, revised 15 Jun 2007.
  7. David McKenzie & Hillel Rapoport, 2011. "Can migration reduce educational attainment? Evidence from Mexico," Journal of Population Economics, Springer, vol. 24(4), pages 1331-1358, October.
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  13. Arias-Vazquez, Francisco Javier & Azuara, Oliver & Bernal, Pedro & Heckman, James J. & Villarreal, Cajeme, 2010. "Policies to Promote Growth and Economic Efficiency in Mexico," IZA Discussion Papers 4740, Institute for the Study of Labor (IZA).
  14. Robert Kaestner & Ofer Malamud, 2010. "Self-Selection and International Migration: New Evidence from Mexico," NBER Working Papers 15765, National Bureau of Economic Research, Inc.
  15. Robert C. Feenstra & Gordon H. Hanson, 2004. "Ownership and Control in Outsourcing to China: Estimating the Property-Rights Theory of the Firm," NBER Working Papers 10198, National Bureau of Economic Research, Inc.
  16. Aaron Tornell & Frank Westermann & Lorenzo Martinez, 2004. "Nafta and Mexico Less-than-Steller Performance," UCLA Economics Working Papers 833, UCLA Department of Economics.
  17. Gordon H. Hanson, 2006. "Illegal Migration from Mexico to the United States," NBER Working Papers 12141, National Bureau of Economic Research, Inc.
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  19. Laura Juarez, 2008. "Are Informal Workers Compensated for the Lack of Fringe Benefits? Free Health Care as an Instrument for Formality," Working Papers 0804, Centro de Investigacion Economica, ITAM.
  20. Daniel Chiquiar & Gordon H. Hanson, 2005. "International Migration, Self-Selection, and the Distribution of Wages: Evidence from Mexico and the United States," Journal of Political Economy, University of Chicago Press, vol. 113(2), pages 239-281, April.
  21. Sebastian Edwards, 2009. "Latin America's Decline: A Long Historical View," NBER Working Papers 15171, National Bureau of Economic Research, Inc.
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Citations

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Cited by:
  1. Andrei A Levchenko & Jing Zhang, 2013. "The Global Labor Market Impact of Emerging Giants: A Quantitative Assessment," IMF Economic Review, Palgrave Macmillan, vol. 61(3), pages 479-519, August.
  2. John Tsalikis & Bruce Seaton & Phillip Shepherd, 2014. "Business Ethics Index: Latin America," Journal of Business Ethics, Springer, vol. 119(2), pages 209-218, January.
  3. Michael King, 2012. "The Unbanked Four-Fifths: Informality and Barriers to Financial Services in Nigeria," The Institute for International Integration Studies Discussion Paper Series iiisdp411, IIIS.
  4. Filho, Irineu de Carvalho & Chamon, Marcos, 2012. "The myth of post-reform income stagnation: Evidence from Brazil and Mexico," Journal of Development Economics, Elsevier, vol. 97(2), pages 368-386.
  5. Autor, David & Dorn, David & Hanson, Gordon H., 2013. "The China Syndrome: Local Labor Market Effects of Import Competition in the United States," IZA Discussion Papers 7150, Institute for the Study of Labor (IZA).
  6. Ran Abramitzky & Leah Platt Boustan & Katherine Eriksson, 2012. "Have the Poor Always Been Less Likely to Migrate? Evidence From Inheritance Practices During the Age of Mass Migration," NBER Working Papers 18298, National Bureau of Economic Research, Inc.
  7. Frankel, Jeffrey A., 2012. "What Small Countries Can Teach the World," Scholarly Articles 8694935, Harvard Kennedy School of Government.
  8. Hanushek, Eric A. & Woessmann, Ludger, 2012. "Schooling, educational achievement, and the Latin American growth puzzle," Journal of Development Economics, Elsevier, vol. 99(2), pages 497-512.
  9. John P. Haisken-DeNew & Maren M. Michaelsen, 2011. "Migration Magnet: The Role of Work Experience in Rural-Urban Wage Diff erentials in Mexico," Ruhr Economic Papers 0263, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  10. Emilio Gutiérrez, 2013. "Air quality and infant mortality in Mexico: Evidence from variation in pollution levels caused by the usage of Small-Scale plants," Working Papers 1301, Centro de Investigacion Economica, ITAM.
  11. Carrasco, Carlos A., 2013. "El Nuevo Consenso Macroeconómico y la mediocridad del crecimiento económico en México
    [New Consensus Macroeconomics and the mediocrity of economic growth in Mexico]
    ," MPRA Paper 53391, University Library of Munich, Germany.

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