Who Benefited from Trade Liberalization in Mexico? Measuring the Effects on Household Welfare

By Alessandro Nicita. 2004

150 citations recorded by the source corpus.

This study performs an ex-post analysis of the effects of the trade liberalization in Mexico between 1989 and 2000, taking into account regional differences in the Mexican economy. The effects of trade liberalization are first translated into changes in regional prices and wages. Those estimates are plugged into a farm-household model to estimate the effect on households'welfare. The findings suggest that trade liberalization has affected domestic prices and labor income differently both across income groups and geographically across the country, hence producing diverse outcomes on different households. Regarding prices, the results indicate that trade liberalization haslowered relative prices of most non-animal agricultural products and, while reducing the cost of consumption, has reduced households'agricultural income, widening the income gap between urban and rural areas. The findings also show that trade liberalization has had diverse effects on wage rates. Skilled workers, for which trade liberalization has produced an increase in wages, have benefited relative to unskilled workers. Wages of unskilled workers have in many regions decreased as a result of trade liberalization. Similar differences are found in the geographic distribution of the benefits of trade liberalization, with the states closest to the U. S. border gaining threefold more relative to the least developed states in the south. Therefore trade liberalization, although beneficial, has contributed to an increase in inequality between the south and the north of the country, urban and rural areas, and skilled and unskilled labor. From a poverty perspective, the trade liberalization that occurred between 1989 and 2000 has had the direct effect of reducing poverty by about 3 percent, therefore lifting approximately 3 million individuals out of poverty.

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/6e6bf5cf550ce4900ee31c1c8f4aed22f5ba1aa4

How researchers see this paper

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In Economics and Econometrics

1. J. Reimer
2. Thomas W. Hertel
3. J. Gourdon
4. B. McCaig
5. Brian Kovak
6. Rafael Dix-Carneiro
7. W. Tyner

Citations in the corpus

• Openness, inequality and poverty: Endowments matter (2006, background): “For example, as shown by Nicita (2004) in his detailed case study of tariff liberalization in Mexico during the 90s, price pass-through effects were substantially different across commodities, and the poverty effects of trade liberalization varied substantially across regions.”
• Predicting the poverty impacts of trade reform (2004, background): “The only study in this survey to seriously come to grips with this issue is Nicita (2004), who estimates a modified version of the popular exchange rate pass-through model (Goldberg & Knetter, 1997).”
• Exporting Out of Poverty: Provincial Poverty in Vietnam and U.S. Market Access (2011, background): “Porto (2003), Porto (2005), and Nicita (2004) predict the impact of changes in trade policy on households.”