Working Paper: NBER ID: w17700
Authors: Timothy J. Kehoe; Felipe Meza
Abstract: In 1950 Mexico entered an economic takeoff and grew rapidly for more than 30 years. Growth stopped during the crises of 1982-1995, despite major reforms, including liberalization of foreign trade and investment. Since then growth has been modest. We analyze the economic history of Mexico 1877-2010. We conclude that the growth 1950-1981 was driven by urbanization, industrialization, and education and that Mexico would have grown even more rapidly if trade and investment had been liberalized sooner. If Mexico is to resume rapid growth -- so that it can approach U.S. levels of income -- it needs further reforms.
Keywords: Economic Growth; Mexico; Stagnation; Trade Liberalization; Reforms
JEL Codes: N16; O11; O54
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Urbanization, industrialization, and education (N93) | Increased real GDP growth rate of 6.5% per year (O57) |
| Fiscal imbalances and deteriorating policies (H69) | Real GDP growth fell to 1.3% per year (F62) |
| Absence of timely liberalization of trade and investment (F69) | Growth stagnation (O49) |
| Reforms targeting inefficiencies in the financial system and other structural issues (E69) | Potential for improved growth (O49) |
| If trade and investment had been liberalized sooner (F69) | Hypothetical higher growth rates (O49) |