Effect of Tariff Liberalization on Mexico’s Income Distribution in the presence of Migration

Rafael Garduno-Rivera and Kathy Baylis
Authors registered in the RePEc Author Service: Rafael Garduño Rivera

No 124740, 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington from Agricultural and Applied Economics Association

Abstract: This paper studies how the North American Free Trade Agreement (NAFTA) affected income distribution within Mexico given internal migration. In low-skilled labor-abundant developing countries, trade liberalization should theoretically increase the income of low-skilled workers, decreasing income disparity. However, anecdotal evidence indicates that NAFTA increased the gap between rich and poor in Mexico, and empirical evidence is mixed (Chiquiar, 2005; Nicita, 2009; Hanson, 2007). Because trade may affect wages differently across regions within the country, accurate measures of wage effects must incorporate intra-national migration. We specifically consider rural to urban migration and find that working age men with low incomes get a boost from the NAFTA in their wages while NAFTA has a negative effect for those with high incomes. There is a slight increase in migration in the years after NAFTA. We also find that, workers far away from the US-Mexico border earn significantly lower wages in comparison to their counterparts in the border. But this effect diminishes after NAFTA, when tariffs decrease. As a result, we find that in urban areas, trade liberalization has reduced income inequalities among working age men.

Keywords: International Relations/Trade; Labor and Human Capital (search for similar items in EconPapers)
Pages: 23
Date: 2012
New Economics Papers: this item is included in nep-geo, nep-int, nep-lab and nep-mig
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Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea12:124740

DOI: 10.22004/ag.econ.124740

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