Trade Openness, Infrastructure, and the Wellbeing of Mexico's South

This paper examines the effects of Mexican infrastructure and trade policy from 1940 to 2000 on the relative economic performance of its southern states of Chiapas, Guerrero, and Oaxaca. Building on the literature of economic geography, I develop an argument based on the importance of infrastructure in economic development, and discuss how the legacy of infrastructure policies that have excluded the south can explain both the south's overall performance and its particularly poor performance in the period of trade openness. Accessing international markets lowers the average costs of large infrastructure investments, thereby increasing the advantage of states that have received these investments. I support this argument by analyzing the industrial evolution of Mexican states, showing not only that states have predictably concentrated in infrastructure-intensive industries if they have such infrastructure (and vice versa), but also that those infrastructure-intensive industries have outperformed other industries in the period of trade openness.