Tracing the Local Impacts of Exports on Poverty and Inequality in Mexico
Evidence on the effect of exports on welfare at the local level is scarce. Using a unique data set of international trade and poverty maps for almost 2,000 Mexican municipalities between 2004 and 2014, the study presented in this paper provides new...
| Main Authors: | , , |
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| Format: | Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2020
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/478291603811926321/Tracing-the-Local-Impacts-of-Exports-on-Poverty-and-Inequality-in-Mexico http://hdl.handle.net/10986/34692 |
| Summary: | Evidence on the effect of exports on
welfare at the local level is scarce. Using a unique data
set of international trade and poverty maps for almost 2,000
Mexican municipalities between 2004 and 2014, the study
presented in this paper provides new evidence on the impact
of a significant rise in exports on poverty and inequality
at the local level. The analysis implements an instrumental
variable approach that combines the initial structure of
exports across municipalities with global trends in exports
from developing to developed countries by sector. The
results show that a 10 percent increase in the ratio of
exports to workers reduces income inequality measured by the
Gini coefficient by 0.17 point (using a 0 to 100 scale), but
no significant effects on poverty reduction or average
household incomes are identified. The lack of impacts on
average incomes is driven by a rise in the supply of labor
at the local level because municipalities with higher export
growth experienced an increase in labor force participation
and attracted more net migration, particularly of unskilled
workers. Therefore, while total labor incomes grew in
response to an increase in exports, average labor income per
worker did not change. Declining remittances also blunted
the effect of growing exports on household incomes. |
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