Effect of Tariff Liberalization on Mexico’s Income Distribution in the presence of Migration
This paper studies how the North American Free Trade Agreement (NAFTA) affected income distribution within Mexico given internal migration. In low-skilled labor-abundant developing countries, trade liberalization should theoretically increase the income of low-skilled workers, decreasing income disparity. However, anecdotal evidence indicates that NAFTA increased the gap between rich and poor in Mexico, and empirical evidence is mixed (Chiquiar, 2005; Nicita, 2009; Hanson, 2007). Because trade may affect wages differently across regions within the country, accurate measures of wage effects must incorporate intra-national migration. We specifically consider rural to urban migration and find that working age men with low incomes get a boost from the NAFTA in their wages while NAFTA has a negative effect for those with high incomes. There is a slight increase in migration in the years after NAFTA. We also find that, workers far away from the US-Mexico border earn significantly lower wages in comparison to their counterparts in the border. But this effect diminishes after NAFTA, when tariffs decrease. As a result, we find that in urban areas, trade liberalization has reduced income inequalities among working age men.
|Date of creation:||2012|
|Contact details of provider:|| Postal: 555 East Wells Street, Suite 1100, Milwaukee, Wisconsin 53202|
Phone: (414) 918-3190
Fax: (414) 276-3349
Web page: http://www.aaea.org
More information through EDIRC
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.:
- Ranjan Priya, 2008. "Growth and Inequality in Closed and Open Economies: The Role of the Product Cycle," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 8(1), pages 1-37, September.
- Patricio Aroca & William F. Maloney, 2005. "Migration, Trade, and Foreign Direct Investment in Mexico," World Bank Economic Review, World Bank Group, vol. 19(3), pages 449-472.
- Finan, Frederico & Sadoulet, Elisabeth & de Janvry, Alain, 2005.
"Measuring the poverty reduction potential of land in rural Mexico,"
Journal of Development Economics,
Elsevier, vol. 77(1), pages 27-51, June.
- Finan, Frederico & Sadoulet, Elisabeth & de Janvry, Alain, 2002. "Measuring the Poverty Reduction Potential of Land in Rural Mexico," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt6xg1q0dg, Department of Agricultural & Resource Economics, UC Berkeley.
- Krugman, Paul & Elizondo, Raul Livas, 1996. "Trade policy and the Third World metropolis," Journal of Development Economics, Elsevier, vol. 49(1), pages 137-150, April.
- Raul Livas Elizondo & Paul Krugman, 1992. "Trade Policy and the Third World Metropolis," NBER Working Papers 4238, National Bureau of Economic Research, Inc.
- Kurt Unger, 2005. "Regional Economic Development and Mexican Out-Migration," NBER Working Papers 11432, National Bureau of Economic Research, Inc.
- World Bank, 2004. "Poverty in Mexico : An Assessment of Conditions, Trends, and Government Strategy," World Bank Other Operational Studies 13829, The World Bank.
- Michael Walton & Gladys Lopez-Acevedo, 2005. "Poverty in Mexico : An Assessment of Conditions, Trends and Government Strategy," World Bank Other Operational Studies 10342, The World Bank.
- World Bank, 2004. "Poverty in Mexico : An Assessment of Conditions, Trends, and Government Strategy," World Bank Other Operational Studies 14586, The World Bank.
- Mishra, Prachi, 2007. "Emigration and wages in source countries: Evidence from Mexico," Journal of Development Economics, Elsevier, vol. 82(1), pages 180-199, January.
- Ernesto Aguayo-Tellez & Jim Airola & Chinhui Juhn, 2010. "Did Trade Liberalization Help Women? The Case of Mexico in the 1990s," NBER Working Papers 16195, National Bureau of Economic Research, Inc.
- 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.
- Baylis, Katherine R. & Garduno-Rivera, Rafael & Piras, Gianfranco, 2009. "The distributional effects of NAFTA in Mexico: evidence from a panel of municipalities," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin 49463, Agricultural and Applied Economics Association.
- Chiquiar, Daniel, 2005. "Why Mexico's regional income convergence broke down," Journal of Development Economics, Elsevier, vol. 77(1), pages 257-275, June.
- Nicita, Alessandro, 2004. "Who benefited from trade liberalization in Mexico? Measuring the effects on household welfare," Policy Research Working Paper Series 3265, The World Bank.
- Nicita, Alessandro, 2009. "The price effect of tariff liberalization: Measuring the impact on household welfare," Journal of Development Economics, Elsevier, vol. 89(1), pages 19-27, May.
- Ann Harrison, 2007. "Globalization and Poverty: An Introduction," NBER Chapters,in: Globalization and Poverty, pages 1-32 National Bureau of Economic Research, Inc.
- Cragg, Michael Ian & Epelbaum, Mario, 1996. "Why has wage dispersion grown in Mexico? Is it the incidence of reforms or the growing demand for skills?," Journal of Development Economics, Elsevier, vol. 51(1), pages 99-116, October.
- Jim Airola, 2008. "A Regional Analysis of the Impact of Trade and Foreign Direct Investment on Wages in Mexico, 1984-2000," Review of Development Economics, Wiley Blackwell, vol. 12(2), pages 276-290, 05.
- Hanson, G.H. & Harrison, A., 1995. "Trade, Technology and Wage Inequality," Papers 95-20, Columbia - Graduate School of Business.
- Gordon H. Hanson & Ann Harrison, 1995. "Trade, Technology, and Wage Inequality," NBER Working Papers 5110, National Bureau of Economic Research, Inc.
- Esquivel, Gerardo & Rodriguez-Lopez, Jose Antonio, 2003. "Technology, trade, and wage inequality in Mexico before and after NAFTA," Journal of Development Economics, Elsevier, vol. 72(2), pages 543-565, December. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:ags:aaea12:124740. See general 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: (AgEcon Search)
If references are entirely missing, you can add them using this form.