February 2010

IZA DP No. 4740: Policies to Promote Growth and Economic Efficiency in Mexico

Francisco Javier Arias-Vazquez, Oliver Azuara, Pedro Bernal, James J. Heckman, Cajeme Villarreal

This paper discusses the problems facing the Mexican economy. It operates under a heavy burden of monopoly and regulation. We focus on two issues that should receive more attention in discussions of Mexican policy. (1) The family is under stress in Mexico and this retards the growth of skills of workforce. (2) The informal sector is large, mostly due to the heavy burden of monopoly and regulation. We find little evidence that the introduction of social protection programs for workers outside the formal sector have promoted the growth of the informal sector.