March 14, 2016
Paul Krugman had a blogpost this morning that included a simple chart showing that Mexico’s per capita GDP has actually diverged from U.S. per capita GDP in the years since NAFTA. This is not supposed to happen, our econ textbooks tell us that poor countries are supposed to grow more rapidly than rich countries and this should have been especially true with Mexico post-NAFTA.
There should not be anything particularly controversial about Krugman’s post, after all it comes directly from World Bank data, but it is worth noting that the World Bank tried to tell an opposite story. Back in 2004, on the tenth anniversary of NAFTA, the World Bank published a study that purported to show a convergence of per capita GDP between Mexico and the United States in the years since NAFTA was passed.
We tried to set them straight, since we knew the data did not support this claim. The World Bank refused to acknowledge the obvious error (it seems their study used exchange rate measures instead of purchasing power parity measures of GDP) and presumably continues to this day to treat their study as being valid. Perhaps Krugman’s simple chart will force them to acknowledge the truth.
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