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Journal of Economic Literature: Vol. 48 No. 4 (December 2010)

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Why Isn't Mexico Rich?

Article Citation

Hanson, Gordon H. 2010. "Why Isn't Mexico Rich?" Journal of Economic Literature, 48(4): 987-1004.

DOI: 10.1257/jel.48.4.987

Abstract

Over the last three decades, Mexico has aggressively reformed its economy, opening to foreign trade and investment, achieving fiscal discipline, and privatizing state owned enterprises. Despite these efforts, the country's economic growth has been lackluster, trailing that of many other developing nations. In this paper, I review arguments for why Mexico hasn't sustained higher rates of economic growth. The most prominent suggest that some combination of poorly functioning credit markets, distortions in the supply of nontraded inputs, and perverse incentives for informality creates a drag on productivity growth. These are factors internal to Mexico. One possible external factor is that the country has the bad luck of exporting goods that China sells, rather than goods that China buys. I assess evidence from recent literature on these arguments and suggest directions for future research. (JEL E23, E65, F14, O10, O20, O47)

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Authors

Hanson, Gordon H. (U CA, San Diego)

JEL Classifications

E23: Macroeconomics: Production
E65: Studies of Particular Policy Episodes
F14: Country and Industry Studies of Trade
O10: Economic Development: General
O20: Development Planning and Policy: General
O47: Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence


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