NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Is Mexico A Lumpy Country?

Andrew B. Bernard, Raymond Robertson, Peter K. Schott

NBER Working Paper No. 10898
Issued in November 2004
NBER Program(s):   ITI

Mexico's experience before and after trade liberalization presents a challenge to neoclassical trade theory. Though labor abundant, it nevertheless exported skill-intensive goods and protected labor-intensive sectors prior to liberalization. Post-liberalization, the relative wage of skilled workers rose. Courant and Deardorff (1992) have shown theoretically that an extremely uneven distribution of factors within a country can induce behavior at odds with overall comparative advantage. We demonstrate the importance of this insight for developing countries. We show that Mexican regions exhibit substantial variation in skill abundance, offer significantly different relative factor rewards, and produce disjoint sets of industries. This heterogeneity helps to both undermine Mexico's aggregate labor abundance and motivate behavior that is more consistent with relative skill abundance.

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Document Object Identifier (DOI): 10.3386/w10898

Published: Andrew B. Bernard & Raymond Robertson & Peter K. Schott, 2010. "Is Mexico a Lumpy Country?," Review of International Economics, Blackwell Publishing, vol. 18(5), pages 937-950, November.

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