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 chang...
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, D.C.
2013
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| 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 |
| Summary: | 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. |
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