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Foreign Direct Investment and Labor Productivity in Regional Manufacturing Industry

Author

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  • Rangel González Erick
  • López Ornelas Luis Fernando

Abstract

Foreign Direct Investment (FDI) is often identified as a driver of economic growth, although there is no consensus on this topic in the international empirical evidence regarding its effect on labor productivity. This document analyzes the effects of Foreign Direct Investment on labor productivity in the manufacturing sector in Mexico during the 2007-2015 period by using panel data and federative entities as unit of analysis. The estimates are calculated by the generalized method of moments, which allows to consider for possible endogeneity problems. The results indicate a positive and statistically significant effect of FDI as a proportion of manufacturing GDP on the growth rate of labor productivity when the latter is estimated with the Manufacturing Labor Productivity Index published by INEGI. Similar results are found if growth in labor productivity is estimated by using manufacturing GDP per worker, although the latter have less statistical power in some specifications.

Suggested Citation

  • Rangel González Erick & López Ornelas Luis Fernando, 2021. "Foreign Direct Investment and Labor Productivity in Regional Manufacturing Industry," Working Papers 2021-12, Banco de México.
    • Handle: RePEc:bdm:wpaper:2021-12
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    More about this item

    Keywords

    Labor Productivity; Foreign Direct Investment; Manufacturing; Mexico;
    All these keywords.

    JEL classification:

    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • Q29 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Other
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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