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The distributional effects of NAFTA in Mexico: Evidence from a panel of municipalities

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  • Baylis, Kathy
  • Garduño-Rivera, Rafael
  • Piras, Gianfranco

Abstract

This paper studies the regional distribution of benefits from trade in Mexico after the North American Free Trade Agreement (NAFTA). Specifically, we ask whether or not NAFTA increased the concentration of economic activity in Mexico. Unlike previous work which uses state-level data, we identify the effect of NAFTA on economic activity at the municipal level allowing us to observe detailed growth patterns across space. To explicitly identify the effect of the trade agreement, we contrast changes in economic activity in regions and sectors more and less likely to be affected by trade. Given the spatial nature of these data, we make use of spatial panel econometric methods. We find that NAFTA caused wealthy regions nearest to the border to grow faster than others, increasing regional disparity. We also find that economic activity in densely populated regions grew less quickly after NAFTA, particularly in the case of traded sectors. Thus, we see evidence that agglomeration lost some of its draw after NAFTA. We also find that regions with a smaller portion of high school graduates and lower levels of infrastructure saw their growth increase after the trade agreement, decreasing regional disparity. We notice these redistributive effects are strongest in the non-traded sectors.

Suggested Citation

  • 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.
  • Handle: RePEc:eee:regeco:v:42:y:2012:i:1:p:286-302 DOI: 10.1016/j.regsciurbeco.2011.09.006
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    Citations

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    Cited by:

    1. Gregory BROCK & Constantin OGLOBLIN, 2015. "A Stochastic Walk Down Mexico’S Mesoamerican Frontier, 1990-2011," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 15(2), pages 99-114.
    2. repec:spr:anresc:v:59:y:2017:i:1:d:10.1007_s00168-017-0823-8 is not listed on IDEAS
    3. Alberto Díaz Dapena & Esteban Fernández Vázquez & Rafael Garduño Rivera & Fernando Rubiera Morollón, 2015. "Does Trade Imply Convergence? Analyzing The Effect of NAFTA on The Local Convergence in Mexico," Working papers DTE 591, CIDE, División de Economía.
    4. Hector M. Nuñez & Dusan Paredes & Rafael Garduño-Rivera, 2017. "Is crime in Mexico a disamenity? Evidence from a hedonic valuation approach," The Annals of Regional Science, Springer;Western Regional Science Association, pages 171-187.
    5. Garduno-Rivera, Rafael, 2010. "Effect of NAFTA on Mexico's Income Distribution in the Presence of Migration," 2010 Annual Meeting, July 25-27, 2010, Denver, Colorado 61895, Agricultural and Applied Economics Association.
    6. Hernandez-Trillo, Fausto, 2016. "Poverty Alleviation in Federal Systems: The Case of México," World Development, Elsevier, vol. 87(C), pages 204-214.
    7. Henderson, Joanne & Baylis, Katherine R. & Barton, Jason, 2010. "Conversion from Staple to Cash Crop Production in Mexico After NAFTA: Effects of PROCAMPO and Credit Constraints," 2010 Annual Meeting, July 25-27, 2010, Denver, Colorado 61525, Agricultural and Applied Economics Association.
    8. Farole, Thomas, 2012. "Competitiveness and Connectivity: Integrating Lagging Regions in Global Markets," World Bank - Economic Premise, The World Bank, issue 93, pages 1-5, October.
    9. Álvarez, Antonio & Garduño, Rafael & Núñez, Héctor, 2016. "Modelling the effect of crime on economic activity: The case of Mexican states," Efficiency Series Papers 2016/01, University of Oviedo, Department of Economics, Oviedo Efficiency Group (OEG).
    10. World Bank, 2013. "Growth without Borders : A Regional Growth Pole Diagnostic for Southern Africa," World Bank Other Operational Studies 16708, The World Bank.
    11. Garduno-Rivera, Rafael & Baylis, Katherine R., 2012. "Effect of Tariff Liberalization on Mexico’s Income Distribution in the presence of Migration," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124740, Agricultural and Applied Economics Association.

    More about this item

    Keywords

    Regional disparities; Trade liberalization; Economic geography; Economic growth; Mexico; Transport cost; Spatial panel data models; NAFTA;

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • F10 - International Economics - - Trade - - - General

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