Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/234675 
Authors: 
Year of Publication: 
2019
Series/Report no.: 
IDB Working Paper Series No. IDB-WP-01086
Publisher: 
Inter-American Development Bank (IDB), Washington, DC
Abstract: 
A rise in import competition can put downward pressure on local prices, increasing consumer welfare, but these gains might be unequal across households depending on the basket of goods they consume. Using a consumer price index for Mexico that varies at the product and city level, this paper analyzes the impact of import competition from low-wage countries, particularly China, on price growth between 2002 and 2017. I find that the trade shock impacted prices. Had import competition remained unchanged, the 15-year change in the consumer price index would have been 7 percentage points higher, on average across all goods, with a much larger impact on products that are highly exposed to import competition. Second, using microdata from a household expenditure survey, I find that all households benefited from this access to cheaper goods, but low-income households benefited more. Finally, I look at these results in the context of income inequality in Mexico, noting that overall income inequality in the country declined during the period of analysis. I show that the pro-poor bias of the China shock contributed to this decline in inequality but only slightly, suggesting that additional factors might have been behind this trend.
Subjects: 
import competition
unequal gains from trade
income inequality
JEL: 
F14
F61
D31
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by-nc-nd Logo
Document Type: 
Working Paper

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