Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/224052 
Year of Publication: 
2020
Series/Report no.: 
IZA Discussion Papers No. 13610
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
Evidence about the effect of exports on welfare at the local level is scarce. Using a unique dataset of international trade and poverty maps for almost 2,000 Mexican municipalities between 2004 and 2014, the study presented in this paper provides new evidence on the impact of a significant rise in exports on poverty and inequality at the local level. The analysis implements an instrumental variable approach that combines the initial structure of exports across municipalities with global trends in exports from developing to developed countries by sector. The results show that a 10 percent increase in the ratio of exports to workers reduces income inequality measured by the Gini coefficient by 0.17 points (using a 0 to 100 scale), but no significant effects on poverty reduction or average household incomes are identified. The lack of impacts on average incomes is driven by a rise in the supply of labor at the local level because municipalities with higher export growth experienced an increase in labor force participation and attracted more net migration, particularly of unskilled workers. Therefore, while total labor incomes grew in response to an increase in exports, average labor incomes per worker did not change. Declining remittances also blunted the effect of growing exports on household incomes.
Subjects: 
international trade
exports
poverty
labor markets
migration
JEL: 
F14
F16
I3
D3
J61
Document Type: 
Working Paper

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