Trade Liberalization In Mexico Research Articles

Mexico's Minimum Wage Data: Trends, Policies, and a Research Agenda

The decline of the real value of the minimum wage amid trade liberalization in Mexico has raised concerns about its policy effectiveness and unintended consequences. The literature has examined the impact of minimum wage adjustments on employment levels, worker earnings, poverty, and inequality. However, findings from different sample periods and regions still need to be reconciled. It is necessary to understand the mechanisms connecting minimum wage to other market components. This research note first explores Mexico’s minimum wage data from 1980 to 2023 to grasp its spatial and temporal trends. We then discuss several future research directions to explore mechanisms through which minimum wage potentially works, including the welfare effect of the policy, the informal sector, and interactions between different policy tools.

Globalized supply chains: Emergent telecouplings in Mexico’s beef economy and environmental leakages

This article analyzes how trade liberalization in Mexico, particularly following the North American Free Trade Agreement (NAFTA), has transformed that nation’s cattle economy into a feedlot system manifesting multiple telecouplings and based on the transnational provision of inputs. A conceptual model is presented that suggests how environmental effects involving land use and GHG emissions emerge from changes in the beef supply chain. The article then presents an empirical analysis establishing that the production of corn and beef has intensified in the wake of NAFTA, and that deforestation rates have declined over the same period. Evidence is also presented showing that this has not precipitated a land sparing effect, given the leakage of deforestation into Central America, which supplies Mexican feedlots with 36 % of their source materials. The article calculates associated GHG emissions and establishes that enteric fermentation dominates deforestation as a source, and that ∼14% of GHGs produced by the post-NAFTA Mexican supply chain are emitted in Central America. This raises accounting questions for signatories to the Paris Climate Treaty, given commitments are nation-based.

Gender, Informal Employment and Trade Liberalization in Mexico

Abstract This paper studies how import liberalization affects formal employment across gender. The theory offers a mechanism to explain how male and female formal employment shares can respond differently to trade liberalization through labor reallocation across tradable and nontradable sectors. Using Mexican data over the period 1993–2001, we find that Mexican tariff cuts increase the probability of working formally for both men and women within four-digit manufacturing industries. The formalization of jobs within tradable sectors is driven by large firms. Constructing a regional tariff measure, we find that regional exposure to import liberalization increases the probability of working formally in the manufacturing sector for both men and women, and especially for men. However in the service sectors, the probability of working formally decreases for low-skilled women.

Gender, Informal Employment and Trade Liberalization in Mexico

We study how trade liberalization affects formal employment across gender. We propose a theoretical mechanism to explain how male and female formal employment shares can respond differently to trade liberalization through labor reallocation across tradable and non-tradable sectors. Using Mexican data over the period 1993-2001, we find that tariff cuts increase the probability of working formally for both men and women within 4-digit manufacturing industries. The formalization of jobs within tradable sectors is driven by large firms. Constructing a regional tariff measure, we find that regional exposure to trade liberalization increases the probability of working formally in the manufacturing sector for both men and women, and especially for men. However in the service sectors, the probability of working formally decreases for low-skilled women.

Sustainability of Trade Liberalization and Antidumping: Evidence from Mexico’s Trade Liberalization toward China

A Negative Binomial Regression Model is used to investigate the sustainability of China–Mexico trade liberalization by testing the tariff lines underpinning Mexico’s successful antidumping (AD) measures against Chinese imports from 1991 to 2011. Evidence shows import tariff cutting and consumption growth have a positive impact on consumer goods but a negative impact on intermediaries. This result implies that while the Mexican government has expended considerable energy on the trade liberalization of intermediate and capital goods, the domestic consumer goods market has been protected from Chinese imports. The empirical results indicate that Mexico’s AD use for consumer goods helps to sustain trade liberalization of intermediate and capital goods under the domestic political pressures for trade opening.

¿Es la ganadería bovina de carne una actividad competitiva en México?

This work measures Mexico’s beef cattle production competitiveness at the macro level for the period from 1980 to 2009, this analysis was performed by calculating six indexes. The final aim is to observe the evolution of competitiveness after trade liberalization in Mexico, the results show that for certain periods, the country turned out to be competitive in the activity of beef production after trade liberalization treaties, however these treaties have led to an increase of imports at a growth rate of 124.7%, above the increase of exports which have augmented in 49%. This represents a reduction of the cattle industry competitiveness, also generated as an effect of increased raw material costs and a decline in the real producer price. Both effects generate dependence of the domestic supply consumption on foreign trade.

Trade Liberalization and Gender Wage Inequality in Mexico

After twenty years of trade liberalization in Mexico, the relationship between gender wage inequality and trade remains insufficiently studied, in spite of evidence of increasing numbers of women in industrial employment. This study aims to analyze the effects of export orientation and other characteristics that represent the industrial underpinnings of restructuring on gender wage inequality for 2001–5. There is consistent evidence of the negative impact of export orientation on men's and women's wages and the gender wage ratio, signifying that women lose in both absolute and relative terms. This result holds after controlling for women's share of employment and the skills of both genders, contrary to the expected effect from trade on equality. There is also a negative relation between a rise in the proportion of unskilled workers and the gender wage ratio, which suggests that the trade-induced skill hypothesis cannot be considered an adequate explanation for gender inequality.

Time Series Tests of Structural Change among Innovation and Trade Liberalization in Mexico

This work analyzes if there has been a structural change in the flow of patents in Mexico, as a consequence of institutional reforms and economic policies. To explore the structural change hypothesis, time series models and unit root tests are used in both series of patents applications for the country’s residents and nonresidents. The analysis indicates that misleading conclusions can be obtained if the presence of structural breaks is not taken into account. Results show until two structural breaks in each series that are widely linked with changes in the economic activity. However, the structural changes occurred in each series, disagree in the estimated breakpoint, for the residents’ series it seems to occur before of the trade openness, meanwhile for the nonresidents the two break points are estimated after the trade openness. Intuitively, innovation activities become more important with the arrival of multinationals as a consequence of the liberal reforms. Our findings about the presence of two structural breaks characterizing the patents series would be indicating that the Mexican economy has experienced a process of technology learning due to the trade reforms implemented since the 1980s, a result in concordance with the theories that sustain that trade liberalization promotes economic growth.

Globalization, regional wage differentials and the Stolper–Samuelson Theorem: Evidence from Mexico

In this paper, I study what factors determined the changes in Mexico's regional wage differentials during the nineties. I exploit the regional variation in exposure to international markets to identify the effects of NAFTA on wages and the skill premium. The results support the presence of Stolper–Samuelson type of responses during Mexico's trade liberalization: regions more exposed to globalization appear to have exhibited an increase in overall wage levels, but a decrease in the skill premium, relative to other regions of the country. The results suggest that trade liberalization has a spatial dimension that is usually neglected in traditional models.

Scale, technique and composition effects in the Mexican agricultural sector: the influence of NAFTA and the institutional environment

More than a decade after NAFTA (North American Free Trade Agreement) entered into force, the environmental effects of agricultural trade liberalization in Mexico are still controversial, emerging, and not fully understood. This paper contributes to the literature that aims to explore trends in input use in the agricultural sector in Mexico during the post-NAFTA period among both commercial/industrial and traditional/rainfed farmers, and examines the influence of the national and multilateral institutional framework on these outcomes. We decompose the post-NAFTA agricultural production data into scale, technique and composition effects to estimate the impact that trade liberalization has had on the use of fertilizer and land use, two key agricultural inputs for which reliable aggregate data is available. We conclude that among commercial farmers patterns of crop type specialization and significant technological improvements have led to some declines in fertilizer use but they have been offset by growth in fertilizer use associated with growing agricultural output. Among traditional farmers increased output and specialization in land-intensive grain crops are contributing to an increase in land under cultivation and technological improvements show the potential, but not yet not the strength, to counteract these effects. We analyse the environmental institutional framework and rural development plans, observing that institutional weaknesses have, in several instances, reduced the environmental benefit of technique and composition effects. We conclude with recommendations about how the Mexican agricultural sector might reap the environmental benefits of international agricultural trade.

From the Import Substitution Model to the Import-Export Model: Reassessing Mexico's Trade Liberalization Process During the Last Two Decades

This paper evaluates Mexico's trade liberalization policy and structural changes in the manufacturing industry and export structure throughout the last two decades. Using the System of National Accounts (SNA) of production and reclassifying it according to the Harmonized Tariff System (HTS), we assess the income elasticity of imports by Great Divisions of the SNA manufacturing production. This approach, using econometric panel data techniques allows an evaluation of the structural change, which pegs Mexico's exports to the international production network, considering that Mexico has transformed a substantial part of its industrial structure into a foreign assembly operation of USA's industry. Additionally, econometric estimations indicate that import elasticity has changed since the NAFTA. These results show an outlasting restriction to economic growth, very much in line with Thirlwall's law.

Merlinda D. Ingco and John D. Nash (eds.). 2004. Agriculture and the WTO: Creating a Trading System for Development. Washington, D.C.: The World Bank, 408 pp., $45.00.

Merlinda D. Ingco and John D. Nash (eds.). 2004. Agriculture and the WTO: Creating a Trading System for Development. Washington, D.C.: The World Bank, 408 pp., $45.00. The World Bank has a view on how agricultural trade liberalization impacts economic development, and this book describes the basis of that perspective. It contains a description of numerous trade policies, some of which hinder and others which aid development. The trade policies are described, often modeled mathematically and graphically, and supported with data. The book has fifteen chapters and two appendices. Each chapter deals with a different aspect of trade policy. This book is about the importance of gaining greater trade liberalization for developing countries and about some of the economic problems confronting those countries now and that will confront them in the future. The first two chapters discuss the importance of agricultural trade policies to developing economies. The authors place the current trade debate in the context of the Doha Round and the achievements of past GATT (General Agreement on Tariffs and Trade) rounds, particularly the Uruguay Round. Chapters 3, 4, 5, and 6 describe different methods countries use to distort production, trade, and price. These chapters do a careful analysis of how developed country policies distort trade to the detriment of international competitors, particularly developing countries. In Chapter 3 much space is allocated to the discussion of export subsidies, while less space is given to food aid and export credit programs. Market access is the theme of Chapter 4, with the appropriate focus placed on import tariffs. Chapter 5 focuses on quota administration. The different types of quota administrations are modeled and discussed in detail. A cross-country comparison of quota levels and their impact on specific sectors in different countries is provided. Finally, Chapter 6 deals with the domestic levels of support for agriculture. In all four of these chapters there is a nice mix of theory and data. The remaining chapters are less integrated. Chapter 7 deals with how agricultural policy reform affects the income distribution in a country. It examines the change in the distribution of income when there is an equal reduction in support rates in all countries; it also examines it in a case study of trade liberalization in Mexico versus trade liberalization in rich countries. The analysis depends completely upon the OECD (Organization for Economic Cooperation and Development) policy evaluation model. Chapters 8 and 9 deal with two issues on which much has been written, multifunctionality and food security. The discussion on multifunctionality attempts to broaden the issue to include lessdeveloped regions and non-agricultural outputs from rural landscapes. The reference to ecological goods and services is a recognition that rural people, particularly farmers, produce more than food and biophysical products. The rather short chapter on food security fleshes out how food security is considered in the rules of the WTO (World Trade Organization). In many developing countries, poverty is a major social, political, and economic issue. The authors of this chapter come to the conclusion that multilateral trade liberalization produces benefits to net-food-importing countries. The terms-of-trade impacts resulting from agricultural trade liberalization depend upon the complete array of government policies and not just those in the agriculture sector. …

Relative prices and wage inequality: evidence from Mexico

This paper examines the link between relative goods prices and relative wages during two periods of Mexico's trade liberalization. The relative price of skill-intensive goods rose following Mexico's entrance to the General Agreement and Tariffs and Trade (GATT) in 1986, but fell after Mexico entered the North American Free Trade Agreement (NAFTA) in 1994. This paper adds a band pass filter to two established techniques to compare the relationship between prices and wages. Results from all three approaches are consistent with a positive long-run relationship between relative output prices and relative wages. The band pass filter results suggest that the relevant time frame for the relationship begins after 3–5 years.

Technology, trade, and wage inequality in Mexico before and after NAFTA

Over the past few years, there has been a substantial increase in wage inequality between skilled and unskilled workers in Mexico. This increment in the wage gap coincided with both a period of rapid technological change and the process of trade liberalization in Mexico that began in the mid-1980s. Using a methodology suggested by Leamer [Leamer, E., 1998. In search of Stolper–Samuelson linkages between international trade and lower wages. In: Susan Collins (Ed.), Imports, Exports and the American Worker, Brookings Institution, pp. 141–202], we separate out the effects of technological progress and trade on the real wage evolution of skilled and unskilled workers in Mexico's manufacturing industry for the periods 1988–1994 and 1994–2000. We find that, as implied by the Stolper–Samuelson theorem, trade liberalization would have led to a reduction in the wage gap in Mexico in the first period. This effect, however, was offset by the large negative impact of technological progress on the real wage of unskilled workers. On the other hand, during the period 1994–2000 the effect of trade liberalization on the wage gap was nil, thus suggesting that the slight increase in wage inequality that occurred in this period was also driven by technological progress.

NAFTA and Convergence in North America: High Expectations, Big Events, Little Time

The negotiations of NAFTA in the early 1990s immediately raised high expectations for economic convergence in North America. These hopes were grounded in neoclassical economics. This paper examines the evidence concerning the impact of NAFTA on economic convergence in North America. Any such analysis is hampered by the big-events-little-time problem, which makes the identification of the NAFTA effect difficult due to contemporaneous big shocks and the relatively little time that has transpired since 1994. Time series evidence shows that the debt crisis of the early 1980s and the Tequila crisis of 1995 stalled a process of convergence that might have accelerated after trade liberalization in Mexico and NAFTA. Cross-country evidence indicates that a substantial share of the current income gap between the U.S. and Mexico can be explained by an institutional gap. Panel data evidence indicates, nevertheless, that NAFTA might have had a substantial effect on manufacturing TFP convergence. But initial conditions determined which regions within Mexico benefited the most, and thus the post-NAFTA period has been characterized by economic divergence within Mexico. We conclude that NAFTA has been helpful but free trade alone will not necessarily lead to economic convergence in North America.

Public Open Access and Private Timber Harvests: Theory and Application to the Effects of Trade Liberalization in Mexico

A common popular assertion is that trade liberalization encourages deforestation. But whether this is true depends on how trade policies affect the allocation of land among competing uses and how they influence illegal cutting of public forests. A model is presented that allows for forests to be either public or private, and public forests are divided into protected (or managed) and threatened categories. Effects of price changes are shown on each part of the forest. An empirical version of the model is applied to the case of Mexico with NAFTA. Most scenarios considered show that NAFTA will have positive long-run effects on forest cover in Mexico but that this is net of losses on private lands.

Contract enforcement and trade liberalization in Mexico's footwear industry

The wave of formal legal system reforms sweeping developing countries provides only a partial solution to the problem of enforcing agreements between firms. Informal institutions govern the majority of interfirm transactions. Economic reform also necessitates changes in these institutions. This paper examines the evolution of contract enforcement in the Mexican footwear industry as trade barriers were removed. In the closed economy, geographic agglomeration of manufacturing allowed the manufacturers' trade associations to maintain information about the behavior of retailers and gave retailers strong incentives to maintain reputations. By providing an alternative source for procurement, trade liberalization weakened the power of manufacturers.

Labor Market Structure in LDCs: Time Series Evidence on Competing Views

This paper reexamines the dualistic view of LDC labor markets by studying the dynamics between and labor markets across a business cycle and a period of trade liberalization in Mexico, 1987-1993. Conventional earnings comparisons, even across time, are shown to be unreliable tests for segmentation. The paper test for, and finds, evidence of queuing to enter formal employment. However, transitions into informality, the size of the informal sector, and levels of mobility in all directions are shown to be pro-cyclical. Overall, the informal sector behaves as an unregulated entrepreneurial sector, rather than the disadvantaged sector of a dualistic labor market. There is evidence for increased subcontracting over time with trade liberalization although it is not clear that workers are worse off.

Employment and Wage Effects of Trade Liberalization: The Case of Mexican Manufacturing

In 1985, after decades of an import-substitution industrial strategy, Mexico initiated a radical liberalization of its external sector. Between 1985 and 1988, import licensing requirements were scaled back to a quarter of earlier levels, reference prices were removed, and tariff rates on most products were substantially reduced. By 1989, Mexico was one of the most open economies in the developing world. Adjusting to trade liberalization required the reallocation of resources between sectors and entailed substantial dislocation of workers. The author analyzes how Mexico's trade liberalization (1985-87) affected employment and wages in indusry, focusing on how it affected average employment and earnings rather than on the link between trade and relative wages. She examines the tradeoff between wage and employment adjustment, identifies which labor groups benefited more from liberalization, and tries to associate changes in employment and wages directly with measures of change in trade protection, rather than link them to changes in imports and exports (which is more common). The author also finds that reductions in quota coverage and tariff levels are associated with moderate reductions in firm-level employment. A 10-point reduction in tariff levels (between 1985 and 1990) is associated with a 2- to 3- percent decline in employment in Mexico. Changes in quota average appear to have no discernible effect on wages, but reduction in tariff levels are associated with increases in average wages. This seems to reflect improved productivity in the reformed industries, which may be related to a shift toward the use of more skilled workers. There seems to have been a slight shift in the skill mix in favor of nonproduction workers. This was paralleled by a sharper increase in the wage differential between skilled and unskilled workers. The wages and employment of skilled production workers were significantly more responsive to changes in protection levels than those of nonproduction workers - perhaps partly because production workers were more heavily concentrated in the industries in which protection levels were greatly reduced.

Economic analysis of deforestation in Mexico

ABSTRACTThis paper uses panel analyses to estimate relationships for agricultural planted area and beef cattle numbers at the state level in Mexico during the period 1970–85, in order to determine the main factors affecting forest land conversion. Of the key policy variables, maize and fertilizer prices appear to be the main influences on the expansion of planted area, whereas beef prices and credit disbursement influence cattle numbers. Population growth also affects both livestock and agricultural activities, and income per capita is positively correlated with cattle expansion. These estimated relationships are used to examine the effects both of agricultural and livestock sectoral policy changes and of trade liberalization in Mexico resulting from the North American Free Trade Agreement (NAFTA). To avoid any unintended impacts of NAFTA on deforestation, it may be necessary for Mexico to make complementary investments in land improvements, especially for existing cultivation on rainfed land.