Beyond the border: the giant in Mexico's rearview mirror

Mexico is growing increasingly concerned about its ability to compete with China in North America.

Limited enforcement and the organization of production

This paper describes a dynamic, general equilibrium model designed to assess whether contractual imperfections in the form of limited enforcement can account for international differences in the organization of production. In the model, limited enforcement constrains some agents to operate establishments below their optimal scale. As a result, economies where contracts are enforced more efficiently tend to be richer and emphasize large scale production. Calibrated simulations of the model reveal that these effects can be large and account for a sizeable part of the observed differences in the size distribution of manufacturing establishments between Mexico and the United States. ; Economic Research Working Paper 0109International trade ; Manufactures ; Maquiladora

Is Mexico ready to roar?

Labor market

Mexico's export woes not all China-induced

Trade ; Exports ; Imports

Financial Crises and Total Factor Productivity: The Mexican Case

Financial crises, total factor productivity, output fluctuations

Why do financial systems differ? History matters

We describe a dynamic model of financial intermediation in which fundamental characteristics of the economy imply a unique equilibrium path of bank and financial market lending. Yet we also show that economies whose fundamental characteristics have converged may continue to have very different financial structures. Because setting up financial markets is costly in our model, economies that emphasize financial market lending are more likely to continue doing so in the future, all else equal.Financial markets

How much will the global financial storm hurt Mexico?

The credibility earned by prudent policymaking over the past decade should help Mexico weather the current financial storm without devastating effects on real economic activity.Economic conditions - Mexico ; Financial crises ; Peso, Mexican ; Foreign exchange ; Financial markets

Are labor markets segmented in Argentina? a semiparametric approach

A large part of the theoretical literature on informal economic activities in developing nations is founded on the assumption that labor markets are segmented. In this paper, we evaluate this premise with data from Argentina's permanent household survey for the 1993-1995 time period. We consider various definitions of informality based on the benefits mandated by Argentina's labor laws. We find that average wages are significantly higher in the formal sector than in the informal sector. We proceed to use a matching estimator to correct for the possible endogeneity of employment outcomes. The wage premium becomes much smaller when one controls for individual characteristics such as age, education and gender, and establishment characteristics, notably size. We then make use to the panel structure of our data to compute a difference-indifference estimate of the formal wage premium. This estimate does not significantly differ from zero, suggesting that unobserved ability accounts for the remaining wage differences across sectors. We conclude that the assumption that labor markets are competitive in Argentina cannot be rejected. The paper also provides a list of facts with which a satisfactory theory of informality for Latin America should be consistent. ; Economic Research Working Paper 0110Argentina ; Financial crises - Latin America ; Labor market ; Employment (Economic theory)

The implications of capital-skill complementarity in economies with large informal sectors

In most developing nations, formal workers tend to be more experienced, more educated, and earn more than informal workers. These facts are often interpreted as evidence that low-skill workers face barriers to entry into the formal sector. Yet, there exists little direct evidence that such barriers are important. This paper describes a model where significant differences arise between formal and informal workers even though labor markets are perfectly competitive. In equilibrium, the informal sector emphasizes low-skill work because informal managers have access to less outside financing, and choose to substitute low-skill labor for physical capital.Labor market