Effect of NAFTA on Mexico's Income Distribution in the Presence of Migration

This paper asks how NAFTA affected income distribution within Mexico considering changes in internal migration. Trade liberalization should theoretically increase the income of low-skilled workers in low-skilled labor-abundant developing countries. Thus, by increasing the wages of poorer workers, one might expect that trade will decrease income disparity. However, anecdotal evidence indicates that NAFTA increased the gap between rich and poor in Mexico. Understanding the distributional effects of NAFTA on regional income is particularly important in countries with high levels of geographic inequality, such as Mexico. Because trade may affect wages differently across regions within the country, accurate trade welfare measures must incorporate intra-national migration. Using household level data before and after NAFTA, I find geographic, gender and educational inequalities in the distribution of Mexican income post NAFTA.Income Distribution, Regional Disparities, Trade Liberalization, Internal-Migration, Food Security and Poverty, International Relations/Trade,

The distributional effects of NAFTA in Mexico: evidence from a panel of municipalities

This paper studies the regional distribution of the benefits from trade in Mexico after NAFTA. Specifically, we ask whether or not NAFTA has increased the concentration of economic activity in Mexico. Unlike previous work which uses state-level data, we identify the effect of NAFTA on economic activity at the municipal level allowing us to observe detailed growth patterns across space. Further, to explicitly identify the effect of the trade agreement, we compare results for growth in traded and non-traded sectors. Given the spatial nature of these data, we make explicit use of spatial econometrics methods. We find that NAFTA caused the wealthy regions nearest to the border to grow faster than others, increasing regional disparity. Second, we find that larger municipalities experienced greater per-capita economic benefits from NAFTA. This effect is particularly noticeable in the north. Somewhat surprisingly, we find that regions with a less literate workforce and worse infrastructure grew faster than other areas after the trade agreement, decreasing regional disparity. We notice these redistributive effects occur primarily in the non-traded sectors.Regional Disparities, Trade Liberalization, Agglomeration Economies, Economic Growth, Mexico, Transport Cost, Spatial econometrics, Community/Rural/Urban Development, International Development, International Relations/Trade,

Effect of NAFTA on Mexico's Income Distribution in the Presence of Migration

This paper asks how NAFTA affected income distribution within Mexico considering changes in internal migration. Trade liberalization should theoretically increase the income of low-skilled workers in low-skilled labor-abundant developing countries. Thus, by increasing the wages of poorer workers, one might expect that trade will decrease income disparity. However, anecdotal evidence indicates that NAFTA increased the gap between rich and poor in Mexico. Understanding the distributional effects of NAFTA on regional income is particularly important in countries with high levels of geographic inequality, such as Mexico. Because trade may affect wages differently across regions within the country, accurate trade welfare measures must incorporate intra-national migration. Using household level data before and after NAFTA, I find geographic, gender and educational inequalities in the distribution of Mexican income post NAFTA

NAFTA's distributional effect on Mexico: three essays in regional economics

This dissertation consists of three empirical essays on the distributional effect of the North American Free Trade Agreement (NAFTA) on regional economic activity, migration and the distribution of wages in Mexico from 1980 to 2010. In the first essay, we use municipal level data from the Mexican Population and Economic censuses to explain the regional distribution of the benefits from trade in Mexico after the NAFTA. To explicitly identify the effect of the trade agreement, we compare results for growth in traded and non-traded sectors. Given the spatial nature of these data, we also make explicit use of spatial econometrics methods. We find that NAFTA caused the wealthy regions nearest to the border to grow faster than others, increasing regional disparity. To confirm that these changes are attributed to NAFTA and not to any other temporal factor, we divided the data by sectors, and found that the trade sector (manufacturing) is affected more strongly by the pull on the northern-border region. In the second essay, I use data from the Mexican Economic and Population censuses to study the effects of trade liberalization on internal-migration patterns in Mexico. Using a gravity model of migration, I find that while economic growth from trade did draw workers to urban regions in the northern Border States of Mexico after NAFTA, much of the trade-driven migration occurred earlier after Mexico joined the GATT and established the maquiladora project. I also find evidence that migration to the United States increased after NAFTA. Further, I find that a base level of income is required to leave, and migration will occur to places with less income disparity. Also, migration flows happen among regions that are around 100 kilometers away from each other; specifically from rural to urban regions. Regions with high levels of remuneration and improved infrastructure were attracting more labor than places with low levels of these. Therefore, I find that greater exposure to trade openness encourages immigration and that income disparity in recipient regions deters migration. In the third essay, I use micro data from the Mexican Population Census and data from the Mexican Economic Census on individual level wages, individual and household characteristics, as well as regional level data in terms of economic growth, education, migration, and other characteristics, to determine regional income disparities throughout each Mexican region. I find that workers far away from the US-Mexico border might not have equally benefited from the effects of trade liberalization in comparison to their counterparts in the border. Large traded sectors induced migration, particularly for poor, and a higher wage overall. I also find that regional transportation benefits have slightly increased migration towards the North. As a result, trade liberalization has not reduced income inequalities, but rather led to a greater regional polarization

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

The distributional effects of NAFTA in Mexico: evidence from a panel of municipalities

This paper studies the regional distribution of the benefits from trade in Mexico after NAFTA. Specifically, we ask whether or not NAFTA has increased the concentration of economic activity in Mexico. Unlike previous work which uses state-level data, we identify the effect of NAFTA on economic activity at the municipal level allowing us to observe detailed growth patterns across space. Further, to explicitly identify the effect of the trade agreement, we compare results for growth in traded and non-traded sectors. Given the spatial nature of these data, we make explicit use of spatial econometrics methods. We find that NAFTA caused the wealthy regions nearest to the border to grow faster than others, increasing regional disparity. Second, we find that larger municipalities experienced greater per-capita economic benefits from NAFTA. This effect is particularly noticeable in the north. Somewhat surprisingly, we find that regions with a less literate workforce and worse infrastructure grew faster than other areas after the trade agreement, decreasing regional disparity. We notice these redistributive effects occur primarily in the non-traded sectors