Journal Issue: World Bank Economic Review, Volume 19, Issue 3

No Thumbnail Available
Issue Date
Journal Title
Journal ISSN
Journal Volume
Spatial Dimensions of Trade Liberalization and Economic Convergence : Mexico 1985-2002
(Oxford University Press on behalf of the World Bank, 2005-09-01) Aroca, Patricio ; Bosch, Mariano ; Maloney, William F.
This article employs established techniques from the spatial economics literature to identify regional patterns of income and growth in Mexico and to examine how they have changed over the period spanned by trade liberalization and how they may be linked to the income divergence observed following liberalization. The article first shows that divergence has emerged in the form of several income clusters that only partially correspond to traditional geographic regions. Next, when regions are defined by spatial correlation in incomes, a south clearly exists, but the north seems to be restricted to the states directly on the United States (U.S.) border and there is no center region. Overall, the principal dynamic of both the increased spatial dependency and the increased divergence lies not on the border but in the sustained underperformance of the southern states, starting before the North American free-trade agreement, and to a lesser extent in the superior performance of an emerging convergence club in the north-center of the country.
Migration, Trade, and Foreign Direct Investment in Mexico
(Oxford University Press on behalf of the World Bank, 2005-09-01) Aroca, Patricio ; Maloney, William F.
Part of the rationale for the North American Free Trade Agreement (NAFTA) was that it will increase trade and foreign direct investment (FDI) flows, creating jobs and reducing migration to the United States (U.S.). Since poor data on illegal migration to the United States make direct measurement difficult, data on migration within Mexico, where census data permit careful analysis, are used instead to evaluate the mechanism behind predictions on migration to the United States. Specifications are provided for migration within Mexico, incorporating measures of cost of living, amenities, and networks. Contrary to much of the literature, labor market variables enter very significantly and as predicted once possible credit constraint effects are controlled for. Greater exposure to FDI and trade deters outmigration, with the effects working partly through the labor market. Finally, some tentative inferences are presented about the impact of increased FDI on Mexico- U.S. migration. On average, a doubling of FDI inflows leads to a 1.5 to 2 percent drop in migration.
Tracking NAFTA's Shadow 10 Years On : Introduction to the Symposium
(Published by Oxford University Press on behalf of the World Bank, 2005-12-27) Lederman, Daniel ; Serven, Luis
The North American Free Trade Agreement (NAFTA) is arguably the first case study of what may be expected from the increasing number of preferential trade agreements involving both developed and developing economies. Ten years after the treaty's inception, it is time to assess how its outcomes compare with initial expectations. The articles in this symposium issue provide insights into the effects of NAFTA on economic geography, trade, wages and migration, and foreign investment from Mexico's perspective. The contributions paint a complex post-NAFTA reality characterized by persistent intra-bloc trade barriers, interregional inequality within Mexico, labor market outcomes that seem closely tied to migration patterns and international trade and investment, and foreign investment flows that appear weakly related to trade agreements.
Has NAFTA Increased Labor Market Integration between the United States and Mexico?
(Published by Oxford University Press on behalf of the World Bank, 2005-09) Robertson, Raymond
This article analyzes three criteria for labor market integration between Mexico and the United States (U.S.) before and since the North American Free Trade Agreement (NAFTA): the responsiveness of Mexican wages to US wage shocks, the speed at which relative wages return to a long-run differential, and changes in the rate of convergence of absolute wages. Tests for increased integration using these three criteria generate mixed results, which are then explored by directly incorporating trade, foreign direct investment (FDI), and migration. The results suggest that trade and FDI did in fact positively contribute to integration but that the increase in border enforcement depressed Mexican wages, masking the positive benefits.
Market Access and Welfare under Free Trade Agreements : Textiles under NAFTA
(Published by Oxford University Press on behalf of the World Bank, 2005-12-29) Cadot, Olivier ; Carrere, Celine ; de Melo, Jaime ; Portugal-Perez, Alberto
The effective market access granted to textiles and apparel under the North American Free Trade Agreement (NAFTA) is estimated, taking into account the presence of rules of origin. First, estimates are provided of the effect of tariff preferences combined with rules of origin on the border prices of Mexican final goods exported to the United States (U.S.) and of U.S. intermediate goods exported to Mexico, based on eight-digit harmonized system tariff-line data. A third of the estimated rise in the border price of Mexican apparel products is found to compensate for the cost of complying with NAFTA's rules of origin, and NAFTA is found to have raised the price of U.S. intermediate goods exported to Mexico by around 12 percent, with downstream rules of origin accounting for a third of that increase. Second, simulations are used to estimate welfare gains for Mexican exporters from preferential market access under NAFTA. The presence of rules of origin is found to approximately halve these gains.
The Effects of NAFTA on Antidumping and Countervailing Duty Activity
(Published by Oxford University Press on behalf of the World Bank, 2005-09) Blonigen, Bruce A.
Treatment of unfair trade laws has become an important topic in negotiations on preferential trading areas. Recent preferential trading areas involving the United States (U.S.), one of the most significant users of these laws, have established special bi-national dispute settlement panels to arbitrate disagreements. Using a panel database of U.S. antidumping and countervailing duty activity from 1980 through 2000, the article examines whether the use of dispute settlement panels has reduced such activity between the United States and its North American Free Trade Agreement (NAFTA) partners. The analysis finds little evidence for any effect, calling into question the effectiveness of dispute settlement panels in reducing unfair trade law activity.
Foreign Direct Investment in Mexico since the Approval of NAFTA
(Published by Oxford University Press on behalf of the World Bank, 2005-12-06) Cuevas, Alfredo ; Messmacher, Miguel ; Werner, Alejandro
Cross-country panel data are used to assess the effect of free-trade agreements on flows of Foreign Direct Investment (FDI). Free-trade agreements are found to have a significant positive effect on FDI flows, and free-trade agreements are found to matter more for the smaller members of the agreement. For example, the North American Free-Trade Agreement's (NAFTA) effect on FDI flows into Mexico is much larger than its effect on flows into the United States. These cross country results are used to assess NAFTA's effect on FDI flows into Mexico. After controlling for a set of other factors such as an increase in worldwide FDI flows the trade agreement is found to generate FDI flows nearly 60 percent higher than they would have been without the agreement.