The Zipf's law and the effects of free trade: The case of Guatemala

The aim of this study is to investigate the impacts of trade policy changes on the order of the size of cities and economic growth of Guatemala between 1921 and 2002. The Pareto coefficient was estimated and an index was used to measure the degree of urban concentration. Finally, a model of the impact of trade liberalization on economic growth was estimated. The main results obtained showed a slight growth in inequality and divergence, although the urban concentration index showed a gradual decline since 1964 (the golden age of the CACM by the year 2002). It was found that the urban concentration has an inverse relationship with the commercial opening and positive economic growth during the period from 1921 to 1964. It was concluded that major cities reduced their growth and that small and medium-sized cities grew at a faster rate than big cities, driven by the growth of international trade.