The economic impact of trade openness on Mexico's indigenous peoples

Abstract

Trade liberalization and openness tend to increase regional inequalities, especially in developing economies, where infrastructure and institutions are immature. Trade-induced inequalities often deteriorate into horizontal inequality across demographic groups and result in the peripheralization of the disadvantaged. This study aims to assess the impact of trade openness on Mexico's indigenous peoples using a difference-in-differences regression analysis framework. We show that Mexico's indigenous peoples have experienced significant disadvantages regarding employment opportunities and economic productivity (measured by gross value added) compared to their nonindigenous counterparts under the North American Free Trade Agreement. We conclude by discussing the relevant implications for policy design to address the disparity.