Graduation Year

Spring 2012

Document Type

Campus Only Senior Thesis

Degree Name

Bachelor of Arts

Department

International Relations

Reader 1

Hilary Appel

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© 2012 Veronica H. Pugin

Abstract

For decades, institutions such as the World Bank, IMF, WTO, OECD, US Congress, and EU have encouraged developing countries to adopt trade liberalization to improve their people's welfare and eventually achieve developed country status. In a comparative analysis to examine trade liberalization's impact on labor, this study found that while Chile and Mexico pursued very similar trade liberalization policies, their outcomes were extraordinarily different. Chile now holds the title as the world's model liberalizer while Mexico continues to struggle to liberalize. Chile's effective use of government intervention to absorb adjustment costs determined its success. This study challenges trade theory's dogma against government intervention and concludes with explicit strategies for hoe developing countries can enact targeted social programs and measures to absorb trade liberalization's painful adjustment costs. Trade liberalization can bring prosperity and opportunities for a country, as long as it is paired with effective government intervention to absorb a degree of adjustment costs.

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