The distributional effects of NAFTA in Mexico: evidence from a panel of municipalities Baylis, Kathy; Garduno-Rivera, Rafael; Piras, Gianfranco

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Baylis, Kathy ; Garduno-Rivera, Rafael ; Piras, Gianfranco
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Regional Science & Urban Economics
Economic geography -- Analysis; Social sciences; Economics
To link to full-text access for this article, visit this link: Byline: Kathy Baylis, Rafael GarduA[+ or -]o-Rivera, Gianfranco Piras Keywords: Regional disparities; Trade liberalization; Economic geography; Economic growth; Mexico; Transport cost; Spatial panel data models; NAFTA Abstract: This paper studies the regional distribution of benefits from trade in Mexico after the North American Free Trade Agreement (NAFTA). Specifically, we ask whether or not NAFTA increased the concentration of economic activity in Mexico. Unlike previous work which uses state-level data, we identify the effect of NAFTA on economic activity at the municipal level allowing us to observe detailed growth patterns across space. To explicitly identify the effect of the trade agreement, we contrast changes in economic activity in regions and sectors more and less likely to be affected by trade. Given the spatial nature of these data, we make use of spatial panel econometric methods. We find that NAFTA caused wealthy regions nearest to the border to grow faster than others, increasing regional disparity. We also find that economic activity in densely populated regions grew less quickly after NAFTA, particularly in the case of traded sectors. Thus, we see evidence that agglomeration lost some of its draw after NAFTA. We also find that regions with a smaller portion of high school graduates and lower levels of infrastructure saw their growth increase after the trade agreement, decreasing regional disparity. We notice these redistributive effects are strongest in the non-traded sectors. Article History: Received 24 February 2010; Revised 14 September 2011; Accepted 15 September 2011 Article Note: (footnote) [star] A previous version of the paper was presented at the 55th North American Meeting of the Regional Science Association International, New York City, NY, Nov. 2008. Comments by discussants and participants are greatly appreciated and helped in improving the paper. Thanks also go to Carl Nelson and Phil Garcia for their numerous good suggestions. We wish to thank the editor and two anonymous referees for their comments and suggestions. Any remaining errors are our own. Gianfranco Piras wants to acknowledge financial support from the Nuclei of the Millennium Science Initiative Program\Regional Science and Public Policy" (MIDEPLAN -- Chile). Usual disclaimers apply.
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