Regional Disparities in Per Capita Income in Mexico and the Role of Manufacturing Industry

This chapter shows that there is a steady increase in regional inequality since the early 1990s: that is, there has been divergence. Divergence post-1985 seems to be the result of the Northern States forging ahead as a result of trade liberalisation and NAFTA (North American Free Trade Agreement). The paper shows that divergence has been the result of differential manufacturing output growth across regions for 2003-2017. To promote convergence, Mexico needs a clear industrial strategy especially towards the Southern states. Among the policies to consider, the paper discusses fiscal incentives, industrial clusters, supporting projects through regional development banks, and export processing zones.