Nothing Special   »   [go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/fip/fedmsr/453.html
   My bibliography  Save this paper

Why have economic reforms in Mexico not generated growth?

Author

Listed:
  • Timothy J. Kehoe
  • Kim J. Ruhl
Abstract
Following its opening to trade and foreign investment in the mid-1980s, Mexico?s economic growth has been modest at best, particularly in comparison with that of China. Comparing these countries and reviewing the literature, we conclude that the relation between openness and growth is not a simple one. Using standard trade theory, we find that Mexico has gained from trade, and by some measures, more so than China. We sketch out a theory in which developing countries can grow faster than the United States by reforming. As a country becomes richer, this sort of catch-up becomes more difficult. Absent continuing reforms, Chinese growth is likely to slow down sharply, perhaps leaving China at a level less than Mexico?s real GDP per working-age person.

Suggested Citation

  • Timothy J. Kehoe & Kim J. Ruhl, 2010. "Why have economic reforms in Mexico not generated growth?," Staff Report 453, Federal Reserve Bank of Minneapolis.
    • Handle: RePEc:fip:fedmsr:453
    as

    Download full text from publisher

    File URL: http://www.minneapolisfed.org/research/sr/sr453.pdf
    Download Restriction: no
    File URL: http://www.minneapolisfed.org/publications_papers/pub_display.cfm?id=4575
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-1037, October.
    2. World Bank, 2008. "Global Purchasing Power Parities and Real Expenditures : 2005 International Comparison Program," World Bank Publications - Books, The World Bank Group, number 21558.
    3. Enrico Spolaore & Romain Wacziarg, 2005. "Borders and Growth," Journal of Economic Growth, Springer, vol. 10(4), pages 331-386, December.
    4. Nora Lustig, 2001. "Life Is Not Easy: Mexico's Quest for Stability and Growth," Journal of Economic Perspectives, American Economic Association, vol. 15(1), pages 85-106, Winter.
    5. Timothy J. Kehoe, 1992. "Modeling the dynamic impact of North American free trade," Working Papers 491, Federal Reserve Bank of Minneapolis.
    6. Yanikkaya, Halit, 2003. "Trade openness and economic growth: a cross-country empirical investigation," Journal of Development Economics, Elsevier, vol. 72(1), pages 57-89, October.
    7. Enrico Spolaore & Alberto Alesina & Romain Wacziarg, 2000. "Economic Integration and Political Disintegration," American Economic Review, American Economic Association, vol. 90(5), pages 1276-1296, December.
    8. Allen, Franklin & Qian, Jun & Qian, Meijun, 2005. "Law, finance, and economic growth in China," Journal of Financial Economics, Elsevier, vol. 77(1), pages 57-116, July.
    9. Holmes, Thomas J. & Jr., James A. Schmitz, 2001. "A gain from trade: From unproductive to productive entrepreneurship," Journal of Monetary Economics, Elsevier, vol. 47(2), pages 417-446, April.
    10. Krugman, Paul, 1980. "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review, American Economic Association, vol. 70(5), pages 950-959, December.
    11. Feenstra, Robert C, 1994. "New Product Varieties and the Measurement of International Prices," American Economic Review, American Economic Association, vol. 84(1), pages 157-177, March.
    12. José de Gregorio & Jong-Wha Lee, 2004. "Growth and Adjustment in East Asia and Latin America," Economía Journal, The Latin American and Caribbean Economic Association - LACEA, vol. 0(Fall 2004), pages 69-134, August.
    13. Timothy J. Kehoe & Kim J. Ruhl, 2008. "Are Shocks to the Terms of Trade Shocks to Productivity?," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(4), pages 804-819, October.
    14. Kohli, Ulrich, 2004. "Real GDP, real domestic income, and terms-of-trade changes," Journal of International Economics, Elsevier, vol. 62(1), pages 83-106, January.
    15. David H. Romer & Jeffrey A. Frankel, 1999. "Does Trade Cause Growth?," American Economic Review, American Economic Association, vol. 89(3), pages 379-399, June.
    16. Aaron Tornell & Frank Westermann & Lorenza Martinez, 2003. "Liberalization, Growth, and Financial Crises: Lessons from Mexico and the Developing World," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 34(2), pages 1-112.
    17. Raphael Bergoeing & Patrick J. Kehoe & Timothy J. Kehoe & Raimundo Soto, 2002. "A Decade Lost and Found: Mexico and Chile in the 1980s," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 5(1), pages 166-205, January.
    18. Zuliu F. Hu & Mohsin S. Khan, 1997. "Why Is China Growing So Fast?," IMF Staff Papers, Palgrave Macmillan, vol. 44(1), pages 103-131, March.
    19. Milner, Chris & Westaway, Tony, 1993. "Country size and the medium-term growth process: Some cross-country evidence," World Development, Elsevier, vol. 21(2), pages 203-211, February.
    20. Francois,Joseph F. & Shiells,Clinton R. (ed.), 2008. "Modeling Trade Policy," Cambridge Books, Cambridge University Press, number 9780521087568, October.
    21. Steve Dowrick & Jane Golley, 2004. "Trade Openness and Growth: Who Benefits?," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 20(1), pages 38-56, Spring.
    22. Claustre Bajona & Tianshu Chu, 2010. "Reforming State Owned Enterprises in China: Effects of WTO Accession," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 13(4), pages 800-823, October.
    23. Natalia Ramondo & Andrés Rodríguez-Clare, 2013. "Trade, Multinational Production, and the Gains from Openness," Journal of Political Economy, University of Chicago Press, vol. 121(2), pages 273-322.
    24. Robert C. Feenstra & Benjamin R. Mandel & Marshall B. Reinsdorf & Matthew J. Slaughter, 2013. "Effects of Terms of Trade Gains and Tariff Changes on the Measurement of US Productivity Growth," American Economic Journal: Economic Policy, American Economic Association, vol. 5(1), pages 59-93, February.
    25. Christian Broda & David E. Weinstein, 2006. "Globalization and the Gains From Variety," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 121(2), pages 541-585.
    26. Edwards, Sebastian, 1998. "Openness, Productivity and Growth: What Do We Really Know?," Economic Journal, Royal Economic Society, vol. 108(447), pages 383-398, March.
    27. Francisco L. Rivera-Batiz & Luis A. Rivera-Batiz, 2018. "Economic Integration and Endogenous Growth," World Scientific Book Chapters, in: Francisco L Rivera-Batiz & Luis A Rivera-Batiz (ed.), International Trade, Capital Flows and Economic Development, chapter 1, pages 3-32, World Scientific Publishing Co. Pte. Ltd..
    28. Chang-Tai Hsieh & Peter J. Klenow, 2009. "Misallocation and Manufacturing TFP in China and India," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 124(4), pages 1403-1448.
    29. Jeffrey D. Sachs & Andrew Warner, 1995. "Economic Reform and the Process of Global Integration," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(1, 25th A), pages 1-118.
    30. Zheng Song & Kjetil Storesletten & Fabrizio Zilibotti, 2011. "Growing Like China," American Economic Review, American Economic Association, vol. 101(1), pages 196-233, February.
    31. Timothy J. Kehoe & Kim J. Ruhl, 2013. "How Important Is the New Goods Margin in International Trade?," Journal of Political Economy, University of Chicago Press, vol. 121(2), pages 358-392.
    32. Romain Wacziarg & Karen Horn Welch, 2008. "Trade Liberalization and Growth: New Evidence," The World Bank Economic Review, World Bank, vol. 22(2), pages 187-231, June.
    33. Francois,Joseph F. & Reinert,Kenneth A. (ed.), 1998. "Applied Methods for Trade Policy Analysis," Cambridge Books, Cambridge University Press, number 9780521589970, October.
    34. Dani Rodrik & Arvind Subramanian & Francesco Trebbi, 2004. "Institutions Rule: The Primacy of Institutions Over Geography and Integration in Economic Development," Journal of Economic Growth, Springer, vol. 9(2), pages 131-165, June.
    35. Guariglia, Alessandra & Poncet, Sandra, 2008. "Could financial distortions be no impediment to economic growth after all? Evidence from China," Journal of Comparative Economics, Elsevier, vol. 36(4), pages 633-657, December.
    36. Costas Arkolakis & Arnaud Costinot & Andres Rodriguez-Clare, 2012. "New Trade Models, Same Old Gains?," American Economic Review, American Economic Association, vol. 102(1), pages 94-130, February.
    37. Lewis, William W., 2004. "The Power of Productivity," University of Chicago Press Economics Books, University of Chicago Press, number 9780226476766.
    38. McGrattan, Ellen R. & Prescott, Edward C., 2009. "Openness, technology capital, and development," Journal of Economic Theory, Elsevier, vol. 144(6), pages 2454-2476, November.
    39. Loren Brandt & Xiaodong Zhu, 2010. "Accounting for China's Growth," Working Papers tecipa-394, University of Toronto, Department of Economics.
    40. Timothy J. Kehoe & Edward C. Prescott, 2002. "Great Depressions of the Twentieth Century," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 5(1), pages 1-18, January.
    41. Edwards, Sebastian, 1989. "Openness, outward orientation, trade liberalization, and economic performance in developing countries," Policy Research Working Paper Series 191, The World Bank.
    42. Timothy J. Kehoe & Kim J. Ruhl, 2008. "Are Shocks to the Terms of Trade Shocks to Productivity?," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(4), pages 804-819, October.
    43. David Dollar & Aart Kraay, 2004. "Trade, Growth, and Poverty," Economic Journal, Royal Economic Society, vol. 114(493), pages 22-49, February.
    44. Sato, Kazuo, 1976. "The Ideal Log-Change Index Number," The Review of Economics and Statistics, MIT Press, vol. 58(2), pages 223-228, May.
    45. Jonathan Eaton & Samuel Kortum, 2002. "Technology, Geography, and Trade," Econometrica, Econometric Society, vol. 70(5), pages 1741-1779, September.
    46. Barry Bosworth & Susan M. Collins, 2008. "Accounting for Growth: Comparing China and India," Journal of Economic Perspectives, American Economic Association, vol. 22(1), pages 45-66, Winter.
    47. Gueorgui Kambourov, 2009. "Labour Market Regulations and the Sectoral Reallocation of Workers: The Case of Trade Reforms," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 76(4), pages 1321-1358.
    48. Broda, Christian & Greenfield, Joshua & Weinstein, David E., 2017. "From groundnuts to globalization: A structural estimate of trade and growth," Research in Economics, Elsevier, vol. 71(4), pages 759-783.
    49. Rawski, Thomas G, 1994. "Chinese Industrial Reform: Accomplishments, Prospects, and Implications," American Economic Review, American Economic Association, vol. 84(2), pages 271-275, May.
    50. Anne Krueger & Aaron Tornell, 1999. "The Role of Bank Restructuring in Recovering from Crises: Mexico 1995-98," NBER Working Papers 7042, National Bureau of Economic Research, Inc.
    51. Backus, David K. & Kehoe, Patrick J. & Kehoe, Timothy J., 1992. "In search of scale effects in trade and growth," Journal of Economic Theory, Elsevier, vol. 58(2), pages 377-409, December.
    52. International Monetary Fund, 1997. "Why is China Growing So Fast?," IMF Economic Issues 1997/005, International Monetary Fund.
    53. Harrison, Ann, 1996. "Openness and growth: A time-series, cross-country analysis for developing countries," Journal of Development Economics, Elsevier, vol. 48(2), pages 419-447, March.
    54. Stephen L. Parente & Edward C. Prescott, 1991. "Technology adoption and growth," Staff Report 136, Federal Reserve Bank of Minneapolis.
    55. James A. Schmitz Jr., 2005. "What Determines Productivity? Lessons from the Dramatic Recovery of the U.S. and Canadian Iron Ore Industries Following Their Early 1980s Crisis," Journal of Political Economy, University of Chicago Press, vol. 113(3), pages 582-625, June.
    56. Dornbusch, Rudiger & Fischer, Stanley & Samuelson, Paul A, 1977. "Comparative Advantage, Trade, and Payments in a Ricardian Model with a Continuum of Goods," American Economic Review, American Economic Association, vol. 67(5), pages 823-839, December.
    57. David N. DeJong & Marla Ripoll, 2006. "Tariffs and Growth: An Empirical Exploration of Contingent Relationships," The Review of Economics and Statistics, MIT Press, vol. 88(4), pages 625-640, November.
    58. Sala-i-Martin, Xavier, 1997. "I Just Ran Two Million Regressions," American Economic Review, American Economic Association, vol. 87(2), pages 178-183, May.
    59. Raphael Bergoeing & Patrick J. Kehoe & Timothy J. Kehoe & Raimundo Soto, 2002. "A Decade Lost and Found: Mexico and Chile in the 1980s," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 5(1), pages 166-205, January.
    60. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
    61. Parente, Stephen L & Prescott, Edward C, 1994. "Barriers to Technology Adoption and Development," Journal of Political Economy, University of Chicago Press, vol. 102(2), pages 298-321, April.
    62. Stephen L. Parente & Edward C. Prescott, 2002. "Barriers to Riches," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262661306, April.
    63. Lee, Ha Yan & Ricci, Luca Antonio & Rigobon, Roberto, 2004. "Once again, is openness good for growth?," Journal of Development Economics, Elsevier, vol. 75(2), pages 451-472, December.
    64. Timothy J. Kehoe & Edward C. Prescott, 2007. "Great depressions of the twentieth century," Monograph, Federal Reserve Bank of Minneapolis, number 2007gdott.
    65. World Bank, 2010. "World Development Indicators 2010," World Bank Publications - Books, The World Bank Group, number 4373.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Timothy J. Kehoe & Felipe Meza, 2011. "Catch-up growth followed by stagnation: Mexico, 1950–2010," Working Papers 693, Federal Reserve Bank of Minneapolis.
    2. Harrison, Ann E. & Rodriguez-Clare, Andres, 2009. "Trade, Foreign Investment, and Industrial Policy," MPRA Paper 15561, University Library of Munich, Germany.
    3. Harrison, Ann & Rodríguez-Clare, Andrés, 2010. "Trade, Foreign Investment, and Industrial Policy for Developing Countries," Handbook of Development Economics, in: Dani Rodrik & Mark Rosenzweig (ed.), Handbook of Development Economics, edition 1, volume 5, chapter 0, pages 4039-4214, Elsevier.
    4. Ariel Burstein & Javier Cravino, 2015. "Measured Aggregate Gains from International Trade," American Economic Journal: Macroeconomics, American Economic Association, vol. 7(2), pages 181-218, April.
    5. Tarlok Singh, 2010. "Does International Trade Cause Economic Growth? A Survey," The World Economy, Wiley Blackwell, vol. 33(11), pages 1517-1564, November.
    6. Colantone, Italo & Crinò, Rosario, 2014. "New imported inputs, new domestic products," Journal of International Economics, Elsevier, vol. 92(1), pages 147-165.
    7. Capolupo, Rosa, 2009. "The New Growth Theories and Their Empirics after Twenty Years," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 3, pages 1-72.
    8. Gita Gopinath & Brent Neiman, 2014. "Trade Adjustment and Productivity in Large Crises," American Economic Review, American Economic Association, vol. 104(3), pages 793-831, March.
    9. Charles Ackah, & Oliver Morrissey, 2007. "Trade Liberalisation is Good for You if You are Rich," Discussion Papers 07/01, University of Nottingham, CREDIT.
    10. Costinot, Arnaud & Rodríguez-Clare, Andrés, 2014. "Trade Theory with Numbers: Quantifying the Consequences of Globalization," Handbook of International Economics, in: Gopinath, G. & Helpman, . & Rogoff, K. (ed.), Handbook of International Economics, edition 1, volume 4, chapter 0, pages 197-261, Elsevier.
    11. Hoste, J. & Verboven, F., 2024. "Uncovering the Sources of Cross-border Market Segmentation: Evidence from the EU and the US," Cambridge Working Papers in Economics 2402, Faculty of Economics, University of Cambridge.
    12. Marilyne Huchet†Bourdon & Chantal Le Mouël & Mariana Vijil, 2018. "The relationship between trade openness and economic growth: Some new insights on the openness measurement issue," The World Economy, Wiley Blackwell, vol. 41(1), pages 59-76, January.
    13. Timothy J. Kehoe & Mark J. Gibson & Kim J. Ruhl & Claustre Bajona, 2008. "Trade liberalization growth and productivity," 2008 Meeting Papers 789, Society for Economic Dynamics.
    14. Hexian Wang & Wei Liu & Mengyuan Zhu & Qing Wang, 2018. "Embrace or Not? An Empirical Study of the Impact of Globalization on the Country’s Sustainability in the Case of NAFTA," Sustainability, MDPI, vol. 10(10), pages 1-16, September.
    15. Bartelme, Dominick & Lan, Ting & Levchenko, Andrei A., 2024. "Specialization, market access and real income," Journal of International Economics, Elsevier, vol. 150(C).
    16. Rubini, Loris, 2014. "Innovation and the trade elasticity," Journal of Monetary Economics, Elsevier, vol. 66(C), pages 32-46.
    17. Wu, Tommy T., 2015. "Firm heterogeneity, trade, multinationals, and growth: A quantitative evaluation," Journal of International Economics, Elsevier, vol. 97(2), pages 359-375.
    18. Aaron Tornell & Frank Westermann & Lorenza Martinez, 2003. "Liberalization, Growth, and Financial Crises: Lessons from Mexico and the Developing World," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 34(2), pages 1-112.
    19. Juan Carlos Conesa & Pau S. Pujolas, 2019. "The Canadian productivity stagnation, 20022014," Canadian Journal of Economics, Canadian Economics Association, vol. 52(2), pages 561-583, May.
    20. Michelle Connolly & Kei-Mu Yi, 2015. "How Much of South Korea's Growth Miracle Can Be Explained by Trade Policy?," American Economic Journal: Macroeconomics, American Economic Association, vol. 7(4), pages 188-221, October.

    More about this item

    JEL classification:

    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • P52 - Political Economy and Comparative Economic Systems - - Comparative Economic Systems - - - Comparative Studies of Particular Economies

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fip:fedmsr:453. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Kate Hansel (email available below). General contact details of provider: https://edirc.repec.org/data/cfrbmus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.