Effect of NAFTA on Mexico's Income Distribution in the Presence of Migration
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This paper asks how NAFTA affected income distribution within Mexico considering changes in internal
migration. Trade liberalization should theoretically increase the income of low-skilled workers in low-skilled labor-abundant
developing countries. Thus, by increasing the wages of poorer workers, one might expect that trade will
decrease income disparity. However, anecdotal evidence indicates that NAFTA increased the gap between rich and
poor in Mexico. Understanding the distributional effects of NAFTA on regional income is particularly important in
countries with high levels of geographic inequality, such as Mexico. Because trade may affect wages differently
across regions within the country, accurate trade welfare measures must incorporate intra-national migration. Using
household level data before and after NAFTA, I find geographic, gender and educational inequalities in the
distribution of Mexican income post NAFTA.