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Infrastructure and FDI Inflows into Mexico: A Panel Data Approach

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Author Info

  • Mollick Andre Varella

    ()
    (Dept of Economics and Finance, University of Texas Pan-American, Edinburg, Texas, USA)

  • Ramos-Duran Rene

    ()
    (Industrial Development Secretariat of the Government of the State of Chihuahua, Mexico)

  • Silva-Ochoa Esteban

    ()
    (Mckinsey & Company, Mexico City)

Abstract

In December 1993, restrictions to foreign ownership across major Mexican economic sectors were abolished. This paper studies output, industrialization intensity, ``international infrastructure", and government expenditures on infrastructure as determinants of FDI inflows into Mexican states over 1994-2001. We conduct a ``general to specific" estimation strategy across Mexican states. Telephone lines appear to be very important to FDI as their coefficients are around 2.0 in Random Effects Models. Industrialization is also important, with coefficients varying from 0.62 to 0.67. Allowing for endogeneity between FDI and real output, dynamic GMM panels confirm the robust effects of telephone lines on FDI. International infrastructure thus appears more conducive to FDI than domestic infrastructure, such as interstate and secondary roads. With international infrastructure being a major catalyst of FDI inflows into Mexico, we provide support to ongoing conventional wisdom promoting such type of investment.

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Bibliographic Info

Article provided by De Gruyter in its journal Global Economy Journal.

Volume (Year): 6 (2006)
Issue (Month): 1 (February)
Pages: 1-27

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Handle: RePEc:bpj:glecon:v:6:y:2006:i:1:n:6

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Cited by:
  1. Francois, Joseph & Manchin, Miriam, 2007. "Institutions, infrastructure, and trade," Policy Research Working Paper Series 4152, The World Bank.
  2. Octavio Escobar, 2011. "The location pattern of FDI in Mexico after NAFTA," ERSA conference papers ersa10p804, European Regional Science Association.
  3. C. Bellak & M. Leibrecht & R. Stehrer, 2010. "The role of public policy in closing foreign direct investment gaps: an empirical analysis," Empirica, Springer, vol. 37(1), pages 19-46, February.
  4. Escobar Gamboa, Octavio Romano, 2009. "IDE entrants, exportations et productivité manufacturière : les différentes performances des régions mexicaines," Economics Thesis from University Paris Dauphine, Paris Dauphine University, number 123456789/3850 edited by Guillochon, Bernard, November.
  5. Markus Leibrecht & Christian Bellak, . "Does the impact of employment protection legislation on FDI differ by skill-intensity of sectors? An empirical investigation," Discussion Papers 09/21, University of Nottingham, GEP.
  6. Jacob A. Jordaan, 2012. "Agglomeration and the location choice of foreign direct investment: new evidence from manufacturing FDI in Mexico," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 27(1), pages 61-97.
  7. Escobar Gamboa, Octavio Romano, 2012. "Foreign direct investment (FDI) determinants and spatial spillovers across Mexico's states," Economics Papers from University Paris Dauphine 123456789/10605, Paris Dauphine University.

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