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Effect of NAFTA on Mexico's Income Distribution in the Presence of Migration

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  • Garduno-Rivera, Rafael

Abstract

This paper asks how NAFTA affected income distribution within Mexico considering changes in internal migration. Trade liberalization should theoretically increase the income of low-skilled workers in low-skilled labor-abundant developing countries. Thus, by increasing the wages of poorer workers, one might expect that trade will decrease income disparity. However, anecdotal evidence indicates that NAFTA increased the gap between rich and poor in Mexico. Understanding the distributional effects of NAFTA on regional income is particularly important in countries with high levels of geographic inequality, such as Mexico. Because trade may affect wages differently across regions within the country, accurate trade welfare measures must incorporate intra-national migration. Using household level data before and after NAFTA, I find geographic, gender and educational inequalities in the distribution of Mexican income post NAFTA.

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Bibliographic Info

Paper provided by Agricultural and Applied Economics Association in its series 2010 Annual Meeting, July 25-27, 2010, Denver, Colorado with number 61895.

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Date of creation: 2010
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Handle: RePEc:ags:aaea10:61895

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Related research

Keywords: Income Distribution; Regional Disparities; Trade Liberalization; Internal-Migration; Food Security and Poverty; International Relations/Trade;

References

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  1. Kurt Unger, 2005. "Regional Economic Development and Mexican Out-Migration," NBER Working Papers 11432, National Bureau of Economic Research, Inc.
  2. Patricio Aroca & William F. Maloney, 2005. "Migration, Trade, and Foreign Direct Investment in Mexico," World Bank Economic Review, World Bank Group, vol. 19(3), pages 449-472.
  3. Raymond Robertson, 2007. "Trade and Wages: Two Puzzles from Mexico," The World Economy, Wiley Blackwell, vol. 30(9), pages 1378-1398, 09.
  4. Ann Harrison, 2007. "Globalization and Poverty: An Introduction," NBER Chapters, in: Globalization and Poverty, pages 1-32 National Bureau of Economic Research, Inc.
  5. Baylis, Kathy & Garduño-Rivera, Rafael & Piras, Gianfranco, 2012. "The distributional effects of NAFTA in Mexico: Evidence from a panel of municipalities," Regional Science and Urban Economics, Elsevier, vol. 42(1-2), pages 286-302.
  6. Nicita, Alessandro, 2009. "The price effect of tariff liberalization: Measuring the impact on household welfare," Journal of Development Economics, Elsevier, vol. 89(1), pages 19-27, May.
  7. Esquivel, Gerardo & Rodriguez-Lopez, Jose Antonio, 2003. "Technology, trade, and wage inequality in Mexico before and after NAFTA," Journal of Development Economics, Elsevier, vol. 72(2), pages 543-565, December.
  8. Raul Livas Elizondo & Paul Krugman, 1992. "Trade Policy and the Third World Metropolis," NBER Working Papers 4238, National Bureau of Economic Research, Inc.
  9. Mishra, Prachi, 2007. "Emigration and wages in source countries: Evidence from Mexico," Journal of Development Economics, Elsevier, vol. 82(1), pages 180-199, January.
  10. Richard Harris & Mary Trainor, 2005. "Capital Subsidies and their Impact on Total Factor Productivity: Firm-Level Evidence from Northern Ireland," Journal of Regional Science, Wiley Blackwell, vol. 45(1), pages 49-74.
  11. Gilles Duranton, 2007. "Urban Evolutions: The Fast, the Slow, and the Still," American Economic Review, American Economic Association, vol. 97(1), pages 197-221, March.
  12. Chiquiar, Daniel, 2005. "Why Mexico's regional income convergence broke down," Journal of Development Economics, Elsevier, vol. 77(1), pages 257-275, June.
  13. Ranjan Priya, 2008. "Growth and Inequality in Closed and Open Economies: The Role of the Product Cycle," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 8(1), pages 1-37, September.
  14. Nicita, Alessandro, 2004. "Who benefited from trade liberalization in Mexico? Measuring the effects on household welfare," Policy Research Working Paper Series 3265, The World Bank.
  15. Kari Hämäläinen & Petri Böckerman, 2002. "Regional Labour Market Dynamics, Housing and Migration," Discussion Papers 284, Government Institute for Economic Research Finland (VATT).
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