We find that NAFTA has increased the concentration of economic activity in Mexico. Output
of regions near the border has grown faster than those regions further from the United States after
NAFTA, even when these border regions already had high levels of economic activity before the trade agreement. Second, we find that the benefits of NAFTA went disproportionately to denselypopulated
regions. This effect is particularly notable for cities in the north. Third, as might be
predicted by a standard Heckscher-Ohlin model, we find that those regions with high rates of illiteracy
benefit more from NAFTA. Regions with low levels of infrastructure also improved economically after
NAFTA, implying a redistributive effect of these economic changes. However, mitigating against this
redistributional effect, those regions with a large percentage of high-skilled labour also benefit more
from the trade agreement.