Immigrants reduce geographic inequality
Brian C Cadena, Brian Kovak 12 August 2013
In the US, fewer and fewer people are moving long distances to pursue job opportunities. Presenting new research on Mexican immigrants in the US, this column argues that there are large welfare gains from the efficient spatial allocation of labour. However, welfare gains from the movement of labour are woefully understudied. If immigrants are more willing to move for a job than natives, policymakers should allow them to do so with ease. Workers should be free to move to markets offering better opportunities.
Recently, economists have noticed some disturbing trends in the US economy. Job creation, job destruction, and job-to-job switches are all in decline (Davis, Faberman, and Haltiwanger 2012; Hyatt and Spletzer 2013). Further, fewer and fewer people are making long-distance moves in order to take better jobs (Molloy, Smith, and Wozniak 2011). This slowdown is problematic because labour mobility, especially across geography, is a key contributor to the dynamism of an economy, and it tends to reduce inequality in economic outcomes across space (Blanchard and Katz 1992).
US, immigration, Mexico
Monetary policy in Latin America: Where are we going?
Christian Daude 10 December 2012
Latin American central banks are facing new challenges in the form of unprecedented levels of uncertainty and exchange rate appreciation pressures. This column, focusing on Brazil, Chile, Colombia, Peru and Mexico, argues that there is an overestimation of the potential output in several Latin American economies, a lack of an explicit policy direction from central banks, and lacklustre frameworks for macroprudential policy. Although inflation targeting has served countries in Latin America well, significant risks remain.
Inflation targeting has served countries in Latin America well . They have achieved macroeconomic stability by reducing inflation and the pass-through of external shocks such as oil price and exchange rate fluctuations (cf. Mishkin and Schmidt-Hebbel 2007).
Macroeconomic policy Monetary policy
inflation targeting, Latin America, Central Banks, foreign exchange, Brazil, Chile, Mexico, Colombia, Peru
Rethinking the ‘war on drugs’: Insights from the US and Mexico
Ernesto Zedillo 22 May 2012
Illegal drugs are one of the planet’s most pressing problems. They shatter hundreds of millions of lives and wreak untold social, economic and political damage in both consuming and producing nations. In this column, ex-President of Mexico Ernesto Zedillo introduces an eBook he edited on the issue that points very strongly in the direction of a serious reconsideration of drug policy.
America’s most loved economics textbook (Mankiw 2012) uses the ‘war on drugs’ to illustrate how restricting supply when demand is inelastic increases the total cash spent on illegal drugs. Every anti-smuggling tactic makes each consignment more profitable. No wonder the US war on drugs is not going so well. Yet despite 40 years of violence, corruption and continuing addiction, the US is in no mood to alter course.
US, Mexico, drug policy, illegal drugs
Getting ready: Preparation for exporting
Leonardo Iacovone, Beata Javorcik 05 April 2012
How do firms adapt their products before starting to export? This column argues they upgrade their products’ quality. Using data from Mexico, it shows that producers tend to enjoy a price premium on the domestic market relative to other companies producing the same product. This premium appears exactly one year before the product is exported, suggesting producers are getting ready to export.
Understanding how domestic companies could be supported in their efforts to break into export markets and diversify their range of export products is an important concern for policymakers. Indeed, export diversification is viewed as a way of stimulating growth by policymakers and academics alike (Rivera-Batiz and Romer 1991, Grossman and Helpman 1991, Hausmann et al 2007).
quality, exports, Mexico
TPP negotiations, anticipatory trade creation, and implications for European trade policy
Florian Mölders, Ulrich Volz 23 March 2012
The Trans-Pacific Partnership is back on course having received interest from the Canada, Japan, and Mexico in recent months. This column argues that as changes to the TPP start to seem more likely, there may be trade effects in anticipation. In the face of potential trade diversion, the column urges European trade policymakers to strengthen the EU’s trading ties with the Asia-Pacific region, preferably by reviving global trade talks.
The Trans-Pacific Partnership (TPP) agreement has been under negotiation since 2010. TPP negotiations build on the Trans-Pacific Strategic Economic Partnership Agreement (P4) between Brunei Darussalam, Chile, New Zealand, and Singapore, which was signed in June 2005 and entered into force in May 2006. The aim of the TPP negotiations has been to create an ambitious preferential trade agreement involving the P4 countries and Australia, Peru, the United States, Vietnam, and Malaysia.
trade policy, Japan, Canada, Mexico, Asia-Pacific, Trans-Pacific Partnership
Does openness generate growth? Reconciling the experiences of Mexico and China
Timothy Kehoe, Kim Ruhl 19 November 2011
In 1985, Mexico opened itself to trade and investment. In recent years, China has followed the same path with much more impressive results. But this column argues that the slow growth and crises that Mexico experienced after the initial boom should act as a warning to those optimistic about China.
Does opening to international trade and foreign investment generate economic growth? A large empirical literature employs regressions with a country’s growth rate as the dependent variable and some measure of openness among the independent variables. Although some researchers find that growth is positively correlated with the share of trade in GDP, Rodríguez and Rodrik (2001) point out that the trade share is not a direct measure of policy. When the dependent variable is a measure of policy, the results are ambiguous and highly sensitive to the exact specification of the regression.
International finance International trade
China, free trade, financial globalisation, openness, Mexico
The two faces of Wal-Mart in Mexico
Leonardo Iacovone, Beata Javorcik, Wolfgang Keller, James R Tybout 20 August 2011
The entry of Wal-Mart into Mexico 20 years ago has reshaped the country’s industrial structure. This column argues that the effect has been polarising. While Wal-Mart’s retailing power has helped more productive companies expand their market shares and boost productivity, the retailer’s pressure to lower prices and innovate has pushed down mark-ups and marginalised less capable producers.
Wal-Mart is a company that polarises. While there is much to be said about the low prices and extensive selection Wal-Mart offers its customers, its business model can be controversial (LA Times 2011). The US Supreme court has just heard a major sex discrimination lawsuit against the firm, and Wal-Mart is frequently in the news for its anti-union policies, its use of “sweatshop” suppliers abroad, and its impact on smaller retailers. Such controversies are not limited to the United States.
Global economy International trade
globalisation, Mexico, Wal-Mart, deregulation
Did trade liberalisation benefit women? The case of Mexico in the 1990s
Ernesto Aguayo-Téllez, Jim Airola, Chinhui Juhn 24 August 2010
Promoting gender equality is a Millennium Development Goal. This column explores the effects of trade liberalisation in Mexico during the 1990s on the country’s gender gap. It finds that trade benefitted sectors of the economy that employ more women, such as textiles and clothing, thereby helping to raise women’s earnings and relative social status.
Promoting gender equality is one of the eight Millennium Development Goals of the United Nations (UN 2009). The potential paths to achieving this goal are many. An oft-cited path is to raise global awareness of the issue and to directly campaign for change. Another possibility may be to integrate poorer and less-developed economies into world markets by encouraging trade liberalisation.
Development International trade Labour markets Poverty and income inequality
development, gender inequality, international trade, Mexico
Multi-product exporters: Product churning, uncertainty and export discoveries
Leonardo Iacovone, Beata Javorcik 01 August 2010
Policymakers care deeply about exports, which have accompanied most successful development stories in the last few decades. This column provides evidence from Mexico suggesting that uncertainty and information asymmetries are significant barriers to entry for exporters and should be the focus of policy interventions.
Virtually all successful development stories in the last few decades have been accompanied by massive increases in exports. It is not surprising therefore that the question of "how do firms start exporting?" is one of great interest to policymakers.
Yet answering that question is difficult since exporting is endogenous to several other poorly understood phenomena such as learning about new markets, development of new products, entry of new firms, etc... Quite simply, it's hard to know what is causing what in most situations.
Development International trade
exports, NAFTA, Mexico