The Impact of Trade Liberalization on Regional Disparities in Mexico

Abstract

After a long period of industrialization based on import substitution (ISI), Mexico started to open up its economy by accessing the General Agreement on Tariffs and Trade (GATT) in 1986. The export‐promotion strategy was transformed into one of regional integration with the signing of the North American Free Trade Agreement (NAFTA) in 1994. The paper explores the impact of the opening of the economy on regional disparities in Mexico using σ and β‐convergence analyses. Four different samples have been employed to control for possible data bias linked to the inclusion of oil‐producing and maquiladora‐based states. The results show that whereas the final stages of the ISI period were dominated by convergence trends, trade liberalization (GATT) and economic integration (NAFTA) have led to divergence. In particular, the NAFTA period is related to divergence regardless of the type of analysis chosen and the sample used.

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