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Byline: Kathy Baylis, Rafael GarduA[+ or -]o-Rivera, Gianfranco
Regional disparities; Trade liberalization; Economic geography;
Economic growth; Mexico; Transport cost; Spatial panel data models;
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.
Received 24 February 2010; Revised 14 September 2011; Accepted 15
(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.