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

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 has lowered 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.

Bibliographic Details

Main Author:	Nicita, Alessandro
Format:	Policy Research Working Paper biblioteca
Language:	English en_US
Published:	World Bank, Washington, D.C. 2004-04
Subjects:	AGRICULTURAL PRODUCTS, AGRICULTURE, APPAREL, AVERAGE PRICES, AVERAGE TARIFF, BORDER PRICE, CAPITAL FLOWS, CHANGES IN TRADE, COMPETITIVE PRESSURES, CONSUMERS, COST OF LIVING, DEMAND ELASTICITY, DEVALUATION, DISEQUILIBRIUM, DISPOSABLE INCOME, DOMESTIC MARKET, DOMESTIC MARKETS, ECONOMETRIC ANALYSIS, ECONOMIC CRISIS, ECONOMIC GROWTH, ECONOMIC POLICIES, ECONOMIC POLICY, ECONOMIC THEORY, ELASTICITY, EMPIRICAL EVIDENCE, EMPLOYMENT, EQUILIBRIUM, EXCHANGE RATE, EXPENDITURES, FACTOR ENDOWMENTS, FACTOR MARKETS, FOREIGN CURRENCY, GDP, IMPACT OF TRADE, IMPACT OF TRADE POLICIES, IMPORT PRICES, IMPORTS, INCOME, INCOME ADJUSTMENTS, INCOME DISTRIBUTION, INCOME EFFECT, INCOME ELASTICITIES, INCOME GROUPS, INDIFFERENCE CURVES, INFLATION, INFLATION RATE, LABOR FORCE, LABOR MARKET, LABOR MARKETS, MARGINAL UTILITY, MARKET IMPERFECTIONS, OPENNESS, POVERTY LINE, PRICE CHANGES, PRICE EFFECT, PRICE ELASTICITIES, PRICE ELASTICITY, PRICE ELASTICITY OF DEMAND, PRICE INDEXES, PRODUCERS, PRODUCTION COSTS, PRODUCTION FUNCTION, PROFIT MARGIN, PURCHASING, PURCHASING POWER, REAL INCOME, REAL WAGES, SPREAD, SUPPLIERS, TARIFF RATE, TARIFF RATES, TARIFF REDUCTION, TARIFF REVENUE, TARIFF SCHEDULE, TIME SERIES, TRADE COSTS, TRADE FLOWS, TRADE LIBERALIZATION, TRADE LIBERALIZATION PROCESS, TRADE POLICIES, TRADE POLICY, TRADE REFORMS, TRADE RESTRICTIONS, TRANSACTION COSTS, TRANSPORT COSTS, UNSKILLED LABOR, UNSKILLED WORKERS, UTILITY FUNCTION, WAGE DIFFERENTIALS, WAGE GAP, WAGE RATE, WAGE RATES, WAGES TRADE, POVERTY, HOUSEHOLD ANALYSIS, EARNINGS, FARM HOUSEHOLD ECONOMIES, LABOR INCOME, AGRICULTURAL INCOME, INCOME GAPS, CONSUMPTION, GEOGRAPHIC DISTRIBUTION, SKILLED WORKERS,
Online Access:	http://documents.worldbank.org/curated/en/2004/04/3335911/benefited-trade-liberalization-mexico-measuring-effects-household-welfare http://hdl.handle.net/10986/14777
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