The Story of Mexico and its Internal Struggles

Before diving into Mexico’s internal struggles, we thought it would be useful to highlight some important data points on the country:/>

  • Mexico has a population of 127.5 million people
  • The country’s life expectancy is 76.9 years with an HDI score of .76
  • The contribution to GDP are broken up as follows: 63.2% services, 33.1% industry, 3.7% agriculture
  • Mexico exports 81.24% of its goods to the US
  • Mexico had a GINI Index rating at .459 in 2015, which ranked as highest in the world followed by Chile (OECD)


Mexican GDP Statistics  (LCU = Local Currency Unit)

Source: World Bank

In Mexico, we see large inequalities in the country, largely separate by geography. Data shows that since 1985, the weight of the Northern states, as a percentage of national GDP, went up from 23% to 28%, while Southern states’ share decreased from 20% to 16% (SEDATU 2014). Experts mark this change over the last 2 decades as a result of Mexico’s economic regime shift from an “import substitution” strategy towards a free-trade approach with the arrival of the NAFTA agreement. Regions along the coasts also are able to support the Travel and Tourism industry, which represented 16% of the country’s total GDP in 2016 (WTTC). In the southernmost regions of the country, we see large indigenous populations, and low GDP per capita relative to the rest of Mexico. According to an Oxfam report, 1% of the Mexican population owns 43% of its wealth.

Aside from inequality, Mexico has a multitude of other economic woes. The four issues we chose to examine are corruption, reliance on exports, high inflation/weak peso, and a heavy reliance of the US. Each of these play a role in exacerbating Mexico’s economic problems, and raise uncertainty for the future.

Corruption has always been prevalent in Mexico. The large presence of the drug trade has created an environment where politicians and lawmakers are often coerced by criminals. Cartels can often take over areas or local governments. Corrupt politicians often act in the their own best interest, which leaves the common people of Mexico behind. This environment does not breed productive legislation. Also, numerous economic studies point to corruption having a negative effect on economic growth (Latin American Journal of Economics).

Mexico is an extremely export driven economy. Exports, while being helpful to growth, can also pose an issue in times of crisis. Countries across the globe reduce consumption, thus hitting exporters very hard. Also, the vast majority of their products are traded in the US (81%), and with the the current administration expressing desires to alter/leave NAFTA, Mexico could face dire consequences. As shown above, Mexico experienced -4.7% GDP growth in 2009. This figure represents the sensitivity of Mexico’s export driven economy to global financial shocks.

Despite recovering, 2017 has been a tumultuous year for the peso. With the election of Trump, the peso dropped due to speculation and uncertainty regarding the currency. With threats to drop out of NAFTA, build a border wall and cut ties with businesses that export production to Mexico, the peso could be subject to additional future devaluation. Persisting inflation could be agitated by a weakened peso, which then could force the central bank to raise interest rates. Raising interest rates decreases overall export levels, which could also prove detrimental to their economy.

While many problems in the Mexican economy are caused internally, there are also external variables that influence the country’s development. Mexico has developed a strong economic relationship with its northern neighbor over the years. This reliance has made its economy susceptible to change whenever the US does, as we all saw in the 2008 financial crisis. In the past 2 decades, the US share of Mexican imports has dropped from 83% to 47%. While Mexico is able to leverage a relationship with a powerful, large economy, it also is vulnerable to competition from the rising economies of the world.

Questions to consider:
How does Mexico’s reliance on the US play a role in its growth and development?What are some strategies the country can undertake to deal with regional disparities in wealth, if any?Sources:


Burke Plater and Will Nuti

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The Jamaican Diaspora: A Labor Crisis or Untapped Investment Potential?

With a relatively small domestic population of about 2.881 million, Jamaica is certainly well-represented by emigrants around the world, particularly among its biggest trading partners (U.S., Canada, U.K.). According to the IMF, there are currently almost as many Jamaicans living abroad as there are on the island. This ‘Jamaican Diaspora,’ (dubbed “the brain drain” by the IMF’s Resident Representative for Jamaica, Constant Lonkeng Ngouana) poses two major challenges for the country. In the long term, Jamaica must “[maintain] an economic environment conducive to a vibrant labor market that would retain Jamaica’s trained labor force within its boundaries.” More immediately, however, it could take advantage of the Diaspora to seek potential benefits from increased overseas investment.

A 2013 World Bank study, “Diaspora Investing: The Business and Investment Interests of the Caribbean abroad,” explored a huge potential for investment in the Caribbean by educated emigrants. The study interviewed 850 members of the Caribbean diaspora, 65% of whom have Jamaican origins. According to the World Bank, 23% of these emigrants already invest in startups in the Caribbean. Many expats are also involved with charitable organizations benefitting their home countries (such as – Jamaicans Abroad Helping Jamaicans at Home), and 90% want to get more involved with the region. 50% of the study’s respondents currently live in London, New York, Toronto, or Miami, representing three nations among Jamaica’s most important trading partners. The World Bank says that some hurdles to exploiting this potential include regulations and limited visibility of investment possibilities.

A recent study by the Caribbean Policy Research Institute, “Value of the Diaspora to Jamaica’s Growth Agenda,” assessed the Diaspora’s effect on the nation (beyond remittances). A July Jamaica Observer article, “Gov’t red tape clogs Diaspora investment,” reacts to this study and criticizes the Jamaican government for failing to take advantage of untapped potential. The Jamaica Observer also emphasizes the Diaspora’s beneficial effects on the US economy, claiming that US$12.8 billion is lost annually in unexploited revenue. At a July Jamaican Stock Exchange meeting, Marlon Hill told Diaspora emigrants, “You have a choice as to where you put your money — Wall Street or Harbour Street.” The JSE wants to double Diaspora investment in the country by 2019.

While the long-term implications of this outward migration are arguably destructive for Jamaica’s labor force, increased Diaspora investment could present a promising short-run growth opportunity for a nation experiencing an average annual real GDP growth rate of only 1%.

Some questions to consider:

  • Is this trend of outward migration sustainable for Jamaica’s workforce? How can Jamaica entice its educated, skilled workforce to stay on the island?
  • How does Jamaica’s response to net emigration differ from other developing countries experiencing similar phenomena?



Elyse Ferris and Jimmy Fleck

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An Interesting Time in the Indian Economy

Once a country filled with poverty, India has been one of the fastest growing countries in the world for the better half of the past decade. A variety different catalysts propelled India to be a major economy in the world:

  • India has a very large young and growing workforce, with their dependency ratio (proportion of children and old people to working-age adults) being one of the best in the world. This has led the Indian economy to be much more productive. This demographic advantage has added a large amount of GDP growth to its economy over the years
  • Infrastructure has been a key driver for the Indian economy over the past decade or so. The government acknowledged the lack of infrastructure (efficient roads, bridges, dams, power), and has invested over $47 billion over the past few years alone in order to build world-class sustainable highways and shipping infrastructure as well. Initiatives over the years by the Indian government on infrastructure has also led to an influx of foreign investment on India which has been an incremental benefit. India jumped over 19 places in World Bank’s Logistics Performance Index primarily due to their initiatives on infrastructure.
  • India’s economy has been able to benefit highly from cheap source labor. This has led to a large boom in its textile industry which comprises of about 5% of total GDP. It is a very diversified industry and has the capacity to produce a large variety of products. In regards to labor specifically, India has also been able to develop businesses within the technology space, where economies of scale have helped India create a competitive advantage within the industry (specifically in relation to IT sourcing)

However, recently, India’s growth has been stagnating. During the second quarter of 2017, India’s growth fell to 5.7%, tying Pakistan but falling behind Bangladesh which is growing over 7%. Looking into the near-term future, a problem that is arising with the Indian economy is the lack of demand for exports due to the highly appreciated Rupee. Annual export growth fell to just 3%, relative to 18% from 2003-2008 Because India is an export-driven economy, the rupee is the only thing that stands in the way of other countries hesitating to demand products from India. In addition to this, economists are also blaming the downturn in economy partially to the decision by the central bank to withdraw the 500 and 1000 rupee banknotes from the financial system. Because India is primarily a cash economy, the move led to cash shortages across India, hitting the country’s main avenues of growth such as its construction and manufacturing sectors. Ultimately, the largest challenge will come from being able to sustain long-term growth, and to be able to do this, the government must get involved in giving significant boosts to India’s health and education sectors. Investment-to-GDP ratio slipped to 30%, from over 35-40% in the past decade. For India to able to truly lay a foundation for long-term performance, its government must implement expansionary policies that ultimately boost India’s struggling sectors.


  • Tamzid & Mac


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The Philippines: An Introduction

Here, we will be introducing the development profile of the Philippines, but first, we saw it as appropriate to initially discuss the Philippines from a biographical perspective.

From Wikipedia

Officially known as the Republic of the Philippines, the nation is located in Southeast Asia and consists of over 7,641 islands (CIA). Originally, the islands were home to exclusively indigenous tribes until 1521, when it was colonized by the Spanish (CIA). With them, the Spanish brought catholicism and many of the institutions of the West. The Philippines remained under the Spanish empire until the 19th and 20th centuries, when a series of revolutions and wars saw the Philippines change hands multiple times until finally, in the middle of the 20th, the Republic of the Philippines was recognized as its own independent nation (CIA).

Today over 100,000,000 people live in the Philippines. The nation consists of many different ethnic groups and many different religions but is primarily catholic (CIA).

From Wikipedia

The GDP, adjusted by PPP, of the archipelago nation was $805.2 billion as of 2016, and the nation exhibited a fairly strong growth rate of 6.8% . More importantly, the GDP per capita was $7,700 as of 2016 (CIA).


27% of the nation works in agriculture while nearly 60% of the population works in the service industry, suggesting some modernization. Additionally, the islands experience concerning inequality, a 44.4 on the Gini index, and a poverty rate or 21.6% (this poverty threshold is measured by estimating the income required to meet basic food needs and other non-food needs).


Despite these troublesome economic indicators, the high growth rate and movement toward more service-based economic activity suggests modernization and development in the Philippines. This is further characterized by many improving health indicators in the Philippines including infant mortality rate and life expectancy (CIA).

“The World Factbook: PHILIPPINES.” Central Intelligence Agency, Central Intelligence Agency, 6 Sept. 2017

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South Africa’s Sustainability Efforts

South Africa, a country to watch: Before we begin to look at the issue of sustainability that affects South Africa, we note a couple points on the country:


    • South Africa is a rapidly-developing country that maintains the largest African economy.
    • The country was admitted to BRICS, a group of emerging national markets previously composed of only Brazil, Russia, India, and China, in 2011.


While South Africa and other developing countries face strong levels of economic growth due to the low hanging fruit found in the early stages of economic development, that growth generates high levels of carbon emissions – those higher than in developed countries. However, the negative global effects of these emissions have put the issue on the developed countries’ radar, drawing increasing focus by world leaders.


Hence, many developed countries have banded together, committing funds to combatting such high global levels of carbon emissions. In the McNicoll et al. paper “Estimating publicly-mobilised private finance for climate action: A South African case study,” the authors note a commitment by developed countries to contribute USD 100 billion per year by 2020. As a result, their research goal was to monitor and track both public and private climate finance. Their findings “suggest that, in the South African context, domestic public actors play the biggest role in mobilization by providing support through targeted policies.” So while this issue is a macroeconomic one, it seems that it is being handled rather internally in South Africa.


One way the government of South Africa is promoting sustainability: the ‘New Growth Path’, set out in the Green Economy Accord. The plan suggests that development of ‘green’ technologies, such as in manufacturing of renewable energy technologies, recycling, and biofuels, can lead to the creation of millions of jobs. The South African government not only wants to show a commitment to sustainability and facilitating the development of green technologies but also views this mission as a pathway to economic development and stronger industrial and innovation sectors in the country.


Things to consider:


    • How does the way the country has responded to carbon emissions differ from the response of an OECD country, for example? Or if you have done research on your developing country: how does South Africa’s response of targeted policies differ from the response of your developing country?
    • Furthermore, should climate change be a high priority for South Africa and other developing countries, or should they simply focus on economic growth and then turn to sustainability? Is it fair to possibly limit economic growth through foreign interference, or is it for the greater good?
    • How can a country strike a balance between sustainable energy practices and economic development? Given that transitions to renewables can be expensive, what are ways that a developing country can make renewable energy production and consumption accessible?


Matt & Carson




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Where are the poor?

The points for debate are in the outline below. The next paragraph is a digression, but an important one.

We looked at PPP per capita and (in passing) the HDI. Two notes in passing. As (i) a general feature of price indices, the function is not transitive. That is, the US-India PPP calculated using US quantities and US vs Indian prices does not give the same result as using Indian quantities and US vs Indian prices. In practice the number reported is a geometric average. The tables in the above Wikipedia link provide PPP per capita income to 5 significant digits. Bullshit. One digit, almost two if countries are similar. The relative ranking of two nearby countries on the list is not statistically meaningful.

The other (ii) is to expand from the HDI to look at the Millennium Development Goals, listed in the book. Some of the MDGs are subdivided. Is such a long list helpful? To rephrase, if your boss gave you the list and said “here are your priorities,” he/she has given you no guidance at all about what you’re to actually do. If your boss is competent, then you’ve just been set up for failure, and had better start job hunting. And if your boss doesn’t understand what he/she has just done, you’d better start job hunting.

Now to the chase. I used to know where the poor people were: in the countryside, closed tied to agriculture and likely directly dependent on what they could wrest from the soil. That had a lot of implications. Here is what I see – I won’t argue why, and I’ve likely missed things. Of course now in some countries, the majority of the poor no longer rural (let’s avoid trying to define “urban”, leave it sloppy for now).

  1. Political economy
    1. peasants don’t matter: so what if they are unhappy, or rebel – that won’t affect you as president-for-life, sitting in the capital. dictatorships are long-lasting
    2. economic policy can focus on urban interests.
  2. Prices
    1. higher agricultural prices help the poor
      1. that is not necessarily true for monocrop cultivators, as they may be net food purchasers – coffee growers in Brazil, sisal growers in Bangladesh
    2. better cultivars and better roads drive down prices and squeeze out the poor
  3. Education
    1. basic literacy and numeracy are good life skills, and can improve public health
    2. middle school and above is pointless – high costs no benefits
  4. Healthcare
    1. public health measures are useful: teaching about safe water
    2. direct provision is impossible. trying to put doctors in rural areas is a poor use of scarce resources
  5. industrialization
    1. irrelevant
    2. if it leads to higher rural taxation to fund it, undesirable

OK, this list should stimulate debate.

Note these PPP GDP per capita (left) and HDI (right) maps correlate closely. The HDI map has 12 categories, the GDP one only 7, so it’s at best a casual, visual observation.

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Intro Topic

In the summer of 1976 I wandered around northern Luzon in the Philippines, during a period of martial law imposed by elected-president-turned-dictator Ferdinand Marcos. I headed up into the mountains to Bontoc. An anecdote tied to that visit will help set up several themes of the class. My time in Bontoc included a hike up the mountains to Maligcong and its terraced rice fields. You can now find an online travel guide, but at the time I visited there was no road, no electricity, no phone, and certainly no guide (FYI neither personal computers nor the internet had been invented). And only one person in the village spoke any English, a boy who was the first ever to attend high school. He could recall but one foreign visitor, a Japanese anthropologist who had spent a month or two there (my memory of that detail is hazy, but I’ve just gotten a 1978 Japanese-language publication through Interlibrary Loan).

So what is life like in such a village? It was within walking distance of a local college, in a small city that had electricity, at least some of the time, regular bus service and two lodging establishments. But the village itself was supported by subsistence agriculture, which provided little cash income and no means for most to access healthcare or education. How does that shape the strategies families adopt? What can be done locally to improve their lives? And how do policies at the national level enhance, or limit, what can be done?

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Text for Fall 2017

  • Perkins, Radelet, Lindauer & Block, Economics of Development, W.W. Norton, 7th ed, 2012. ISBN-13: 978-0393934359

I am not assigning a supplemental text – we will however use free (downloadable) resources from the World Bank, EconPapers and elsewhere. Do any of you know novels that give a flavor of life in a rural developing country? The only ones I know are those in the The No. 1 Ladies’ Detective Agency series, set in Botswana, by Alexander McCall Smith. But even those are set mainly in a city.

In choosing the text, I compared it to 3 others: de Janvry & Sadoulet, Todaro & Smith, and Ray. The topics each covers vary. Ray is heavy on theory and on South Asia while J&S organize their content around specific empirical studies with an emphasis on South and Central America. T&S covers too much too quickly, with many chapters I find extraneous to an economics-based treatment. Even at 20 chapters, PRL&B treat fewer topics, with individuals sections that verge on (and sometimes are) readable essays.

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