Why Isn't Mexico Rich?

34 Pages Posted: 18 Oct 2010

See all articles by Gordon H. Hanson

Gordon H. Hanson

University of California, San Diego (UCSD) - Graduate School of International Relations and Pacific Studies (IRPS); National Bureau of Economic Research (NBER)

Date Written: October 2010

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 non-traded 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.

Suggested Citation

Hanson, Gordon H., Why Isn't Mexico Rich? (October 2010). NBER Working Paper No. w16470. Available at SSRN: https://ssrn.com/abstract=1692533

Gordon H. Hanson (Contact Author)

University of California, San Diego (UCSD) - Graduate School of International Relations and Pacific Studies (IRPS) ( email )

9500 Gilman Drive
La Jolla, CA 92093-0519
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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