publication . Preprint . 2005

Interest Groups and Trade Reform in Mexico

Luis Sanchez-Mier;
Open Access
  • Published: 01 Apr 2005
Mexico experienced widespread economic reform in the last two decades. From being a protectionist economy with a policy of import substitution, it has turned into an export-oriented open economy. Why was protectionism a stable policy, and how was it overturned by a reform that went against entrenched interests? I apply a game theoretic model of political influence and economic reform to answer these questions using data to calculate the payoffs for the relevant interest groups. In the underlying cooperative game, the core is empty and a protectionist coalition of import-substituting firms and the government was "stable" until the eighties. Adjusting the model's ...
free text keywords: Trade Reform, Mexico, Coalition Formation, Aspirations, Cooperative Games, Interest Groups, jel:C71, jel:D72, jel:O12, jel:O24
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20 references, page 1 of 2

Source: Base de Datos Pol´ıticos de las Am´ericas, (1999).

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iM80000 60000 40000 20000 0 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 Source: INEGI.

The income statements of the public firms in manufacturing reveal an average net income margin33 of approximately 8%. This estimate is based on the reported net income margins of 33 firms traded in the Mexican stock exchange for the years of 1992-2001.

INEGI reports value of sales data for the manufacturing sector only from 1987 to 1995. Using this figures and the average net income margin of 8% gives an average of net income to output of 4%. Using output data from INEGI, Figure 3.5 shows the estimated net income of the manufacturing sector in the period 1991-2002. 33The ratio of net income to total sales.

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[8] Sa´nchez-Mier, L. (2005): “A Theory of Political Influence and Economic Reform,” Universidad de Guanajuato Working Paper.

[9] Schneider, B.R. (2002): “Why is Mexican Business so Organized?,” Latin American Research Review, 37, 77-118.

20 references, page 1 of 2
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