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

Garduno Rivera, Rafael

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Description

Title

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

Author(s)

Garduno Rivera, Rafael

Issue Date

2012-06-27T21:28:15Z

Director of Research (if dissertation) or Advisor (if thesis)

Baylis, Katherine R.

Doctoral Committee Chair(s)

Baylis, Katherine R.

Committee Member(s)

• Arends-Kuenning, Mary P.
• Hewings, Geoffrey J.D.
• Winter-Nelson, Alex E.

Department of Study

Agr & Consumer Economics

Discipline

Agricultural & Applied Econ

Degree Granting Institution

University of Illinois at Urbana-Champaign

Degree Name

Ph.D.

Degree Level

Dissertation

Keyword(s)

• Income Distribution
• Internal-Migration
• Mexico
• Regional Disparities
• Trade Liberalization

Abstract

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.

Graduation Semester

2012-05

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Copyright and License Information

Copyright 2012 Rafael Garduno Rivera

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