We examine in this paper the relation between government size and capital and labor openness employing a panel of the 32 Mexican states over the period 1996-2006. Making use of two alternative measures of capital and labor openness and employing several alternative econometric specifications, we first find systematic positive effects of our openness measures on the size of the states’ total government spending. Thereafter, we break down total government expenditure and focus on three subcategories of spending associated with social welfare: education, health and poverty alleviation programs. We find that FDI flows, our proxy for capital openness, are not significant determinants of the state’s social spending, but labor openness, in the form of international migration, has a significant and even greater impact on some of the aforementioned categories than on total spending.
This paper evaluates if, after ten years of implementation, the conditional cash transfer program Progresa/Oportunidades has had an effect on labor market outcomes among young beneficiaries in rural Mexico. We use a specific module for the young aged 14 to 24 in the 2007 wave of the Rural Households Evaluation Survey and apply a multi-treatment methodology for different time exposition to the program to identify effects on employment probability, wages, migration and intergenerational occupational mobility. Our results show very little evidence of program impacts on employment, wages or inter-generational occupational mobility among the cohort of beneficiaries under study. This suggests that, despite well documented effects on human capital accumulation of the beneficiaries, labor market prospects in the localities under the program remain sparse.