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Catch-up Growth Followed by Stagnation: Mexico 1950–2008

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  • Timothy Kehoe
  • Felipe Meza

Abstract

In 1950 Mexico entered an economic takeoff and grew rapidly for more than 30 years. Growth stopped during the crises of 1982-1995, despite major reforms, including liberalization of foreign trade and investment. Since then growth has been modest. We analyze the economic history of Mexico 1877-2010. We conclude that the growth 1950-1981 was driven by urbanization, industrialization, and education and that Mexico would have grown even more rapidly if trade and investment had been liberalized sooner. If Mexico is to resume rapid growth—so that it can approach U.S. levels of income—it needs further reforms.

Suggested Citation

  • Timothy Kehoe & Felipe Meza, 2011. "Catch-up Growth Followed by Stagnation: Mexico 1950–2008," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 48(2), pages 227-268.
  • Handle: RePEc:ioe:cuadec:v:48:y:2011:i:2:p:227-268
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    References listed on IDEAS

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    1. Gueorgui Kambourov, 2009. "Labour Market Regulations and the Sectoral Reallocation of Workers: The Case of Trade Reforms," Review of Economic Studies, Oxford University Press, vol. 76(4), pages 1321-1358.
    2. E. Cristina Echevarria, 2008. "International trade and the sectoral composition of production," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(1), pages 192-206, January.
    3. Raphael Bergoeing & Patrick J. Kehoe & Timothy J. Kehoe & Raimundo Soto, 2002. "A Decade Lost and Found: Mexico and Chile in the 1980s," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 5(1), pages 166-205, January.
    4. Buera, Francisco J. & Kaboski, Joseph P., 2012. "Scale and the origins of structural change," Journal of Economic Theory, Elsevier, vol. 147(2), pages 684-712.
    5. Kehoe, Timothy J. & Ruhl, Kim J., 2009. "Sudden stops, sectoral reallocations, and the real exchange rate," Journal of Development Economics, Elsevier, vol. 89(2), pages 235-249, July.
    6. Raphael Bergoeing & Patrick J. Kehoe & Timothy J. Kehoe & Raimundo Soto, 2002. "A Decade Lost and Found: Mexico and Chile in the 1980s," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 5(1), pages 166-205, January.
    7. Felipe Meza, 2008. "Financial Crisis, Fiscal Policy, and the 1995 GDP Contraction in Mexico," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 40(6), pages 1239-1261, September.
    8. Raphael Bergoeing & Patrick J. Kehoe & Timothy J. Kehoe & Raimundo Soto, 2002. "Decades lost and found: Mexico and Chile since 1980," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win, pages 3-30.
    9. Timothy J. Kehoe & Kim J. Ruhl, 2010. "Why Have Economic Reforms in Mexico Not Generated Growth?," Journal of Economic Literature, American Economic Association, vol. 48(4), pages 1005-1027, December.
    10. Meza Felipe & Quintin Erwan, 2007. "Factor Utilization and the Real Impact of Financial Crises," The B.E. Journal of Macroeconomics, De Gruyter, vol. 7(1), pages 1-41, September.
    11. Timothy J. Kehoe & Edward C. Prescott, 2002. "Great Depressions of the Twentieth Century," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 5(1), pages 1-18, January.
    12. Stephen L. Parente & Edward C. Prescott, 2002. "Barriers to Riches," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262661306, January.
    13. Cole, Harold L. & Kehoe, Timothy J., 1996. "A self-fulfilling model of Mexico's 1994-1995 debt crisis," Journal of International Economics, Elsevier, vol. 41(3-4), pages 309-330, November.
    14. Timothy J. Kehoe & Edward C. Prescott(), 2007. "Great depressions of the twentieth century," Monograph, Federal Reserve Bank of Minneapolis, number 2007gdott.
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    Citations

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    Cited by:

    1. Asturias, Jose & Hur, Sewon & Kehoe, Timothy J. & Ruhl, Kim J., 2016. "The interaction and sequencing of policy reforms," Journal of Economic Dynamics and Control, Elsevier, vol. 72(C), pages 45-66.
    2. Chang, Roberto & Fernández, Andrés & Gulan, Adam, 2017. "Bond finance, bank credit, and aggregate fluctuations in an open economy," Journal of Monetary Economics, Elsevier, vol. 85(C), pages 90-109.
    3. Kehoe, Timothy J. & Costa, Daniela & Raveendranathan, Gajen, 2016. "The Stages of Economic Growth Revisited: Part 1: A General Framework and Taking Off into Growth," Economic Policy Paper 16-5, Federal Reserve Bank of Minneapolis.
    4. Sangeeta Pratap & Carlos Urrutia & Felipe Meza, 2014. "Credit, Misallocation and TFP: The case of Mexico (2003-2010)," 2014 Meeting Papers 701, Society for Economic Dynamics.
    5. Felipe Meza & Sangeeta Pratap & Carlos Urrutia, 2014. "Credit, Sectoral Misallocation and TFP: The Case of Mexico 2003-2010," Working Papers 1402, Centro de Investigacion Economica, ITAM.
    6. Kiyutsevskaya, Anna & Narkevich, Sergei & Trunin, Pavel, 2016. "The Transformation of the Role and Tasks of the Central Bank (Monetary Authorities) in the Modern Economy," Working Papers 2136, Russian Presidential Academy of National Economy and Public Administration.
    7. Kehoe, Timothy J. & Costa, Daniela & Raveendranathan, Gajen, 2016. "The Stages of Economic Growth Revisited, Part 2: Catching Up to and Joining the Economic Leader," Economic Policy Paper 16-6, Federal Reserve Bank of Minneapolis.

    More about this item

    Keywords

    Mexico; economic growth; total factor productivity;

    JEL classification:

    • N16 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Latin America; Caribbean
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O54 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean

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