Luis Sanchez-Mier () (School of Economics, Universidad de Guanajuato)
Abstract
Mexico experienced widespread economic reform in the last two decades. From being a protectionist economy with a policy of import substitution, it has turned into an export-oriented open economy. Why was protectionism a stable policy, and how was it overturned by a reform that went against entrenched interests? I apply a game theoretic model of political influence and economic reform to answer these questions using data to calculate the payoffs for the relevant interest groups. In the underlying cooperative game, the core is empty and a protectionist coalition of import-substituting firms and the government was "stable" until the eighties. Adjusting the model's parameters to changes in the government's financing options in the late eighties and early nineties leads to a different and unique outcome. In the predicted outcome a free trade policy is adopted through cooperation between all players.
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Length: 32 pages Date of creation: Date of revision: Publication status: Published as "Grupos de InterŽs y Reforma Comercial en MŽxico", El Trimestre Econ—mico, Vol. LXXIII (2), No 290, pages 337-361. Handle: RePEc:gua:wpaper:ec200502
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Find related papers by JEL classification: C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Models of Political Processes: Rent-seeking, Elections, Legislatures, and Voting Behavior O12 - Economic Development, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development O24 - Economic Development, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy