Who benefited from trade liberalization in Mexico? Measuring the effects on household welfare
AbstractThis study performs an ex-post analysis of the effects of the trade liberalization in Mexico between 1989 and 2000, taking into account regional differences in the Mexican economy. The effects of trade liberalization are first translated into changes in regional prices and wages. Those estimates are plugged into a farm-household model to estimate the effect on households'welfare. The findings suggest that trade liberalization has affected domestic prices and labor income differently both across income groups and geographically across the country, hence producing diverse outcomes on different households. Regarding prices, the results indicate that trade liberalization haslowered relative prices of most non-animal agricultural products and, while reducing the cost of consumption, has reduced households'agricultural income, widening the income gap between urban and rural areas. The findings also show that trade liberalization has had diverse effects on wage rates. Skilled workers, for which trade liberalization has produced an increase in wages, have benefited relative to unskilled workers. Wages of unskilled workers have in many regions decreased as a result of trade liberalization. Similar differences are found in the geographic distribution of the benefits of trade liberalization, with the states closest to the U. S. border gaining threefold more relative to the least developed states in the south. Therefore trade liberalization, although beneficial, has contributed to an increase in inequality between the south and the north of the country, urban and rural areas, and skilled and unskilled labor. From a poverty perspective, the trade liberalization that occurred between 1989 and 2000 has had the direct effect of reducing poverty by about 3 percent, therefore lifting approximately 3 million individuals out of poverty.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by The World Bank in its series Policy Research Working Paper Series with number 3265.
Date of creation: 01 Apr 2004
Date of revision:
Environmental Economics&Policies; Labor Policies; Markets and Market Access; Economic Theory&Research; Payment Systems&Infrastructure; Markets and Market Access; Environmental Economics&Policies; Economic Theory&Research; TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT; Access to Markets;
Find related papers by JEL classification:
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-08-16 (All new papers)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Krugman, Paul, 1991.
"Increasing Returns and Economic Geography,"
Journal of Political Economy, University of Chicago Press,
University of Chicago Press, vol. 99(3), pages 483-99, June.
- Robert Feenstra & Gordon H. Hanson, 2003.
"Productivity Measurement And The Impact Of Trade And Technology On Wages: Estimates For The U.S., 1972-1990,"
Working Papers, University of California, Davis, Department of Economics
9717, University of California, Davis, Department of Economics.
- Robert C. Feenstra & Gordon H. Hanson, . "Productivity Measurement And The Impact Of Trade And Technology On Wages: Estimates For The U.S., 1972-1990," Department of Economics, California Davis - Department of Economics 97-17, California Davis - Department of Economics.
- Robert C. Feenstra & Gordon H. Hanson, 1997. "Productivity Measurement and the Impact of Trade and Technology on Wages: Estimates for the U.S., 1972-1990," NBER Working Papers 6052, National Bureau of Economic Research, Inc.
- Leamer, Edward E, 1996. "Wage Inequality from International Competition and Technological Change: Theory and Country Experience," American Economic Review, American Economic Association, American Economic Association, vol. 86(2), pages 309-14, May.
- Robert C. Feenstra, 1987.
"Symmetric Pass-Through of Tariffs and Exchange Rates Under Imperfect Competition: An Empirical Test,"
NBER Working Papers
2453, National Bureau of Economic Research, Inc.
- Feenstra, Robert C., 1989. "Symmetric pass-through of tariffs and exchange rates under imperfect competition: An empirical test," Journal of International Economics, Elsevier, Elsevier, vol. 27(1-2), pages 25-45, August.
- Porto, Guido G., 2003. "Trade reforms, market access, and poverty in Argentina," Policy Research Working Paper Series 3135, The World Bank.
- L. Alan Winters, 2002. "Trade Liberalisation and Poverty: What are the Links?," The World Economy, Wiley Blackwell, vol. 25(9), pages 1339-1367, 09.
- Reimer, Jeffrey J., 2002.
"Estimating the Poverty Impacts of Trade Liberalization,"
GTAP Working Papers
1163, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
- Reimer, Jeffrey J., 2002. "Estimating the poverty impacts of trade liberalization," Policy Research Working Paper Series 2790, The World Bank.
- Ianchovichina, Elena & Nicita, Alessandro & Soloaga, Isidro, 2001.
"Trade reform and household welfare : the case of Mexico,"
Policy Research Working Paper Series
2667, The World Bank.
- Nicita, Alessandro, 2004. "Efficiency and equity of a marginal tax reform - income, quality, and price elasticities for Mexico," Policy Research Working Paper Series 3266, The World Bank.
- Hanson, Gordon H, 1997. "Increasing Returns, Trade and the Regional Structure of Wages," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 107(440), pages 113-33, January.
- Pinelopi K. Goldberg & Nina Pavcnik, 2003.
"The Response of the Informal Sector to Trade Liberalization,"
NBER Working Papers
9443, National Bureau of Economic Research, Inc.
- Koujianou Goldberg, Pinelopi & Pavcnik, Nina, 2003. "The response of the informal sector to trade liberalization," Journal of Development Economics, Elsevier, Elsevier, vol. 72(2), pages 463-496, December.
- Goldberg, Pinelopi Koujianou & Pavcnik, Nina, 2003. "The Response of the Informal Sector to Trade Liberalization," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3874, C.E.P.R. Discussion Papers.
- Edmonds, Eric V. & Pavcnik, Nina, 2005. "The effect of trade liberalization on child labor," Journal of International Economics, Elsevier, Elsevier, vol. 65(2), pages 401-419, March.
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page. reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roula I. Yazigi).
If references are entirely missing, you can add them using this form.