Unlike technical progress in transport or communication technologies, regional trade agreements are political decisions that can be reversed, as Brexit and the campaign promises of President-elect Donald Trump to raise tariffs on imports from Mexico demonstrate. This column analyses the consequences for the car industry of these two examples of the dismantling of an RTA. Car production would fall significantly in the UK under Brexit and in Mexico under ‘Trumpit’ due to a combination of tariff-induced sales losses and increased plant costs.
Keith Head, Thierry Mayer, 12 November 2016
Gary Hufbauer, Euijin Jung, 29 September 2016
Donald Trump has consistently made headlines with unusual and potentially dangerous economic policy proposals, including threatening to pull out of the WTO, renegotiating trade agreements, and imposing tariffs on imports from Mexico and China. This column explores the legal and economic dimensions of these proposals. Old and modern legal statutes could allow a US president to implement such policies, and the repercussions for the US economy could be severely negative.
Ralph De Haas, Steven Poelhekke, 22 September 2016
The extraordinary expansion in global mining activity over the last two decades, and its increasing concentration in emerging markets, has reignited the debate over the impact of mining on local economic activity. This column analyses how the presence of nearby mines influences firms in eight countries with large manufacturing and mining sectors. Mines are found to out-compete local manufacturing firms for inputs, labour, and infrastructure. However, mining activity is found to improve the business environment on a wider geographic scale.
Benjamin Faber, Cecile Gaubert, 29 June 2016
Governments around the world continue to fund tourism promotion policies, even while current economic literature debates whether tourism in the long run benefits the economy as a whole. This column uses the empirical context of Mexico to analyse the economic implications of international and domestic tourism, and the underlying mechanisms. It finds that tourism provides long-run economic gains to households, both at the local level and in the aggregate.
Eva Arceo, Rema Hanna, Paulina Oliva, 16 April 2016
Pollution levels are orders of magnitude higher in lower-income countries than in the developed world. This means that studies of the health effects of pollution based on data from the latter will not necessarily be relevant to the former. This column reports on the effect of air pollution on infant mortality in Mexico City. Significant effects are found that are much larger than found in earlier work based on US data. These findings highlight the potential pitfalls of naively extrapolating findings from high-income to developing countries.
Javier Cravino, Andrei Levchenko, 23 November 2015
Large exchange rate swings remain a prominent and recurring feature of the world economy. This column uses household consumption patterns to examine the distributional impact of the devaluation of the peso during Mexico’s ‘Tequila Crisis’. Cost of living increases are found to be 1.25 to 1.6 times higher for the poor compared to the rich. In the interests of equity, exchange rate policy should take account of such distributional impacts.
David Atkin, Benjamin Faber, Marco Gonzalez-Navarro, 08 June 2015
Much attention has been paid to supermarkets descending on developing nations, not least because retail is traditionally a big employer. Presenting evidence from Mexico, this column argues that the debate about new foreign retail outlets should focus far more on how supermarkets can greatly reduce the cost of living for the vast majority of local households rather than restricting attention to potentially adverse effects on nominal incomes within the retail sector.
Carlos Cantú, KeyYong Park, Aaron Tornell, 12 April 2015
The wisdom of structural reform during a crisis is a subject of heated debate. This column compares Greece’s experience to that of Mexico during the debt crisis of the 1980s. Mexico did not receive a haircut until seven years into the crisis – after structural reform was already underway. In Mexico that reform was the outcome of an internal conversation – not a diktat from the outside – and it happened during the height of the crisis.
Sebastian Edwards, 04 February 2015
The conventional ‘trilemma’ view is that countries that allow free capital flows can still pursue independent monetary policies as long as they allow flexible exchange rates. This column examines the pass-through of Federal Reserve interest rates to policy rates in Chile, Colombia, and Mexico. The author concludes that, to the extent that central banks take into account other central banks’ policies, there will be ‘policy contagion’ and that, even under flexible rates, monetary policy will not be fully independent.
Brian 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.
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.
Ernesto Zedillo, 22 April 2016
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 - originally published 22 May 2012 -- the 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.
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.
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.
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.
Leonardo Iacovone, Beata Javorcik, Wolfgang Keller, James 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.
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.
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.