Border Effects between U.S. and Mexico

Abstract

I use disaggregated good prices data for U.S. and Mexican cities for nine categories of consumer prices to estimate the “border effect’ on U.S. - Mexican relative price and find that for all the categories of goods it is an order of magnitude larger than for U.S. - Canadian prices (13.22 versus 2.25 for the CPI) However, during a very stable period in Mexico (May 1988 to November 1994), the “width” of the border falls dramatically for all the categories of goods analyzed (3.22 versus 13.22 for the CPI).