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Tracing the Local Impacts of Exports on Poverty and Inequality in Mexico

Author

Listed:
  • Rodriguez Castelan, Carlos

    (World Bank)

  • Vazquez, Emmanuel

    (Universidad Nacional de la Plata)

  • Winkler, Hernan

    (World Bank)

Abstract
Evidence about the effect of exports on welfare at the local level is scarce. Using a unique dataset of international trade and poverty maps for almost 2,000 Mexican municipalities between 2004 and 2014, the study presented in this paper provides new evidence on the impact of a significant rise in exports on poverty and inequality at the local level. The analysis implements an instrumental variable approach that combines the initial structure of exports across municipalities with global trends in exports from developing to developed countries by sector. The results show that a 10 percent increase in the ratio of exports to workers reduces income inequality measured by the Gini coefficient by 0.17 points (using a 0 to 100 scale), but no significant effects on poverty reduction or average household incomes are identified. The lack of impacts on average incomes is driven by a rise in the supply of labor at the local level because municipalities with higher export growth experienced an increase in labor force participation and attracted more net migration, particularly of unskilled workers. Therefore, while total labor incomes grew in response to an increase in exports, average labor incomes per worker did not change. Declining remittances also blunted the effect of growing exports on household incomes.

Suggested Citation

  • Rodriguez Castelan, Carlos & Vazquez, Emmanuel & Winkler, Hernan, 2020. "Tracing the Local Impacts of Exports on Poverty and Inequality in Mexico," IZA Discussion Papers 13610, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp13610
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    References listed on IDEAS

    as
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    Cited by:

    1. López, María del Carmen Delgado & Fonseca-Zendejas, Alejandro Steven, 2023. "Analysis of the intersectoral synchronization of the Mexican economy," Structural Change and Economic Dynamics, Elsevier, vol. 64(C), pages 225-235.

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    More about this item

    Keywords

    international trade; exports; poverty; labor markets; migration;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty
    • D3 - Microeconomics - - Distribution
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers

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