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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)

Suggested Citation

  • Gordon H. Hanson, 2010. "Why Isn't Mexico Rich?," Journal of Economic Literature, American Economic Association, vol. 48(4), pages 987-1004, December.
  • 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 listed on IDEAS

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    Citations

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    Cited by:

    1. 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.
    2. Andrei A Levchenko & Jing Zhang, 2013. "The Global Labor Market Impact of Emerging Giants: A Quantitative Assessment," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 61(3), pages 479-519, August.
    3. Jeffrey Frankel, 2012. "What Small Countries Can Teach the World," Business Economics, Palgrave Macmillan;National Association for Business Economics, vol. 47(2), pages 97-103, April.
    4. Abramitzky, Ran & Boustan, Leah Platt & Eriksson, Katherine, 2013. "Have the poor always been less likely to migrate? Evidence from inheritance practices during the age of mass migration," Journal of Development Economics, Elsevier, vol. 102(C), pages 2-14.
    5. Rahul Giri & Enrique Seira & Kensuke Teshima, 2013. "Did trade crisis affect different exporters differently? Case of Mexico," Working Papers 1304, Centro de Investigacion Economica, ITAM.
    6. McManus, T. Clay & Schaur, Georg, 2016. "The effects of import competition on worker health," Journal of International Economics, Elsevier, vol. 102(C), pages 160-172.
    7. 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.
    8. repec:spr:laecrv:v:26:y:2017:i:1:d:10.1007_s40503-017-0044-7 is not listed on IDEAS
    9. David H. Autor & David Dorn & Gordon H. Hanson, 2013. "The China Syndrome: Local Labor Market Effects of Import Competition in the United States," American Economic Review, American Economic Association, vol. 103(6), pages 2121-2168, October.
    10. Davide Gandolfi & Timothy Halliday & Raymond Robertson, 2017. "Trade, FDI, migration, and the place premium: Mexico and the United States," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 153(1), pages 1-37, February.
    11. Orraca Romano, Pedro Paulo, 2016. "Essays on development and labour economics for Mexico," Economics PhD Theses 0816, Department of Economics, University of Sussex.
    12. Torre Cepeda, Leonardo E. & Ramos, Luis Fernando Colunga, 2015. "Patterns of TFP growth in Mexico: 1991–2011," The North American Journal of Economics and Finance, Elsevier, vol. 34(C), pages 398-420.
    13. 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.
    14. John Tsalikis & Bruce Seaton & Phillip Shepherd, 2014. "Business Ethics Index: Latin America," Journal of Business Ethics, Springer, vol. 119(2), pages 209-218, January.
    15. 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.
    16. Gutiérrez, Emilio & Teshima, Kensuke, 2016. "Does household financial access facilitate law compliance? Evidence from Mexico," Economics Letters, Elsevier, vol. 149(C), pages 120-124.
    17. 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.
    18. Ian Coxhead & Rashesh Shrestha, 2016. "Could a Resource Export Boom Reduce Workers’ Earnings? The Labour-Market Channel in Indonesia," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 52(2), pages 185-208, May.
    19. Ito, Tadashi, 2015. "On the variety of Mexico's export goods," IDE Discussion Papers 510, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    20. repec:mie:wpaper:6237 is not listed on IDEAS
    21. Torre Cepeda Leonardo E. & Colunga Ramos Luis Fernando, 2015. "Patterns of Total Factor Productivity Growth in Mexico: 1991-2011," Working Papers 2015-24, Banco de México.

    More about this item

    JEL classification:

    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • O20 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - General
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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