Is structural adjustment with a human face possible? The case of Mexico

Abstract

The article attempts to model structural adjustment patterns in a single, middle‐income oil exporter, Mexico. It explores the economy‐wide costs, in terms of economic growth, income inequality and poverty, of Mexico's economic stabilisation policies of the 1980s. On the basis of counterf actual simulation, it also explores the likely impacts of alternative adjustment strategies. This analysis utilises a modified Social Accounting Matrix (SAM) approach designed to overcome one of the major shortcomings of the conventional SAM: the assumption of unitary expenditure elasticities in household accounts. The base model is calibrated to track the overall and sectoral growth performance of the Mexican economy from 1980 to 1986 and becomes the foundation upon which our policy experiments are built. The article is part of an on‐going study of economy‐wide impacts of alternative structural adjustment policies in Mexico [Adelman and Taylor, 1990], and proceeds as follows: the SAM framework and estimated SAM are described in parts I and II; part III presents the base SAM model solution for 1980 to 1986; part IV presents the results of the policy experiments; and the conclusions are summarised in part V.