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Interest Groups and Trade Reform in Mexico

Author

Listed:
  • Luis Sanchez-Mier

    (Department of Economics and Finance, Universidad de Guanajuato)

Abstract

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 parameters to changes in the government's financing options in the late eighties and early nineties leads to a different and unique outcome. In the predicted outcome a free trade policy is adopted through cooperation between all players.

Suggested Citation

  • Luis Sanchez-Mier, 2005. "Interest Groups and Trade Reform in Mexico," Department of Economics and Finance Working Papers EC200502, Universidad de Guanajuato, Department of Economics and Finance, revised Apr 2005.
    • Handle: RePEc:gua:wpaper:ec200502
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    File URL: http://economia.ugto.org/WorkingPapers/EC200502.pdf
    File Function: Revised version, 2005
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    More about this item

    Keywords

    Trade Reform; Mexico; Coalition Formation; Aspirations; Cooperative Games; Interest Groups;
    All these keywords.

    JEL classification:

    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O24 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy

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