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Uneven Development and the Liberalisation of Trade and Capital Flows: The Case of Mexico

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  • Skott, Peter
  • Larudee, Mehrene

Abstract

A dual economy model is used to analyze the preconditions for successful industrialization under different trading and investment regimes. Assuming increasing returns to scale in industry and decreasing returns in agriculture, it is shown that protectionism may aid economic development at some point in a country's development process but retard it at others, that the desirable degree of openness depends on the stage of development already attained, and that improvements in agricultural productivity may reduce the overall rate of growth under a free-trade regime. Applying the model to Mexico, it is argued that liberalization is likely to bring long-run industrialization in the Mexican case but that this strategy implies substantial costs to a large segment of the population in the short and medium term. Copyright 1998 by Oxford University Press.

Suggested Citation

  • Skott, Peter & Larudee, Mehrene, 1998. "Uneven Development and the Liberalisation of Trade and Capital Flows: The Case of Mexico," Cambridge Journal of Economics, Oxford University Press, vol. 22(3), pages 277-295, May.
  • Handle: RePEc:oup:cambje:v:22:y:1998:i:3:p:277-95
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    Cited by:

    1. de Souza, Joao Paulo A., 2014. "Growth Complementarity Between Agriculture and Industry: Evidence from a Panel of Developing Countries," UMASS Amherst Economics Working Papers 2014-11, University of Massachusetts Amherst, Department of Economics.
    2. Gabriel, Luciano Ferreira & Jayme, Frederico G. & Oreiro, José Luis, 2016. "A North-South Model of Economic Growth, Technological Gap, Structural Change and Real Exchange Rate," Structural Change and Economic Dynamics, Elsevier, vol. 38(C), pages 83-94.
    3. Oyvat, Cem, 2016. "Agrarian Structures, Urbanization, and Inequality," World Development, Elsevier, vol. 83(C), pages 207-230.
    4. Penelope Pacheco-López, 2004. "Does The Impact of Trade Liberalisation on Exports, Imports, the Balance of Payments and Growth: the Case of Mexico," Studies in Economics 0401, School of Economics, University of Kent.
    5. de Souza, Joao Paulo A., 2015. "Evidence of growth complementarity between agriculture and industry in developing countries," Structural Change and Economic Dynamics, Elsevier, vol. 34(C), pages 1-18.
    6. Blunch, Niels-Hugo & Verner, Dorte, 1999. "Sector growth and the dual economy model - evidence from Cote d'Ivoire, Ghana, and Zimbabwe," Policy Research Working Paper Series 2175, The World Bank.
    7. Carlos Ibarra, 2003. "Slow Growth, Trade Liberalisation and the Mexican Disease: A medium-term macroeconomic model with an application to Mexico," International Review of Applied Economics, Taylor & Francis Journals, vol. 17(3), pages 269-292.

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