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Policies for Industrial Learning in China and Mexico

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Author Info

  • Kevin P. Gallagher

    (Research and Information System for Developing Countries)

  • Mehdi Shafaeddin

Abstract

Previous work has shown that the results of both China and Mexicos export-led market reforms over the past quarter century have been strikingly different. In contrast to China, Mexico has not managed to increase the value added of its exports of manufactured goods and has subsequently had a difficult time competing with China in world markets. Building on this previous work, in this paper we conduct a comparative analysis of the role of government policies in industrial learning and the development of capabilities of indigenous firms in Mexico and China in order to shed light on why China is outperforming Mexico. We find that Mexico and China have had starkly different approaches to economic reform in this area. Mexicos approach to reform has been followed a neo-liberal path, whereas Chinas approach could be described as neo-developmental. Mexicos hands-off approach to learning has resulted in a lack of development of endogenous capacity of domestic firms, little transfer of technology, negligible progress in the upgrading of industrial production, and little increase in value added of exports. By contrast, China has deployed a hands-on approach of targeting and nurturing domestic firms through a gradual and trial and error led set of government policies.

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Bibliographic Info

Paper provided by East Asian Bureau of Economic Research in its series Trade Working Papers with number 22782.

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Date of creation: Jan 2009
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Handle: RePEc:eab:tradew:22782

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Postal: JG Crawford Building #13, Asia Pacific School of Economics and Government, Australian National University, ACT 0200
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Related research

Keywords: trade; economic reform; China; Mexico; economic growth;

References

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  1. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  2. Manuel Agosin & Roberto Machado, 2005. "Foreign Investment in Developing Countries: Does it Crowd in Domestic Investment?," Oxford Development Studies, Taylor & Francis Journals, vol. 33(2), pages 149-162.
  3. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 94(5), pages 1002-37, October.
  4. van Elkan, Rachel, 1996. "Catching up and slowing down: Learning and growth patterns in an open economy," Journal of International Economics, Elsevier, vol. 41(1-2), pages 95-111, August.
  5. Holger Görg & David Greenaway, 2004. "Much Ado about Nothing? Do Domestic Firms Really Benefit from Foreign Direct Investment?," World Bank Research Observer, World Bank Group, World Bank Group, vol. 19(2), pages 171-197.
  6. Gallagher, Kevin P. & Moreno-Brid, Juan Carlos & Porzecanski, Roberto, 2008. "The Dynamism of Mexican Exports: Lost in (Chinese) Translation?," World Development, Elsevier, vol. 36(8), pages 1365-1380, August.
  7. Bell, Martin & Ross-Larson, Bruce & Westphal, Larry E., 1984. "Assessing the performance of infant industries," Journal of Development Economics, Elsevier, vol. 16(1-2), pages 101-128.
  8. Shafaeddin, Mehdi & Pizarro, Juan, 2007. "From Export Promotion To Import Substitution; Comparative Experience of China and Mexico," MPRA Paper 6650, University Library of Munich, Germany, revised Oct 2007.
  9. Bruton, H.J., 1998. "A Reconsideration of Import Substitution," Center for Development Economics 156, Department of Economics, Williams College.
  10. Sargent, John & Matthews, Linda, 2008. "Capital Intensity, Technology Intensity, and Skill Development in Post China/WTO Maquiladoras," World Development, Elsevier, vol. 36(4), pages 541-559, April.
  11. Baldwin, Robert E, 1969. "The Case against Infant-Industry Tariff Protection," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 77(3), pages 295-305, May/June.
  12. Henry J. Bruton, 1998. "A Reconsideration of Import Substitution," Journal of Economic Literature, American Economic Association, vol. 36(2), pages 903-936, June.
  13. Moore, Robert E., 1997. "Learning-by-Doing and trade policy in a developing economy," MPRA Paper 10172, University Library of Munich, Germany.
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Remembering Alice Amsden: Catching up or Falling Behind?
    by Mehdi Shafaeddin in Triple Crisis on 2012-03-19 13:38:40
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Cited by:
  1. Shafaeddin, Mehdi, 2010. "The Role of China in Regional South-South Trade in Asia-Pacific: Prospects for industrialization of the low-income countries," MPRA Paper 26358, University Library of Munich, Germany.
  2. Shafaeddin, Mehdi, 2009. "The Impact of the Global Economic Crisis on Industrialization of Least Developed Countries," MPRA Paper 18788, University Library of Munich, Germany.
  3. Shafaeddin, Mehdi, 2010. "The rationale for South-South trade; An Alternative Approach," MPRA Paper 26354, University Library of Munich, Germany.
  4. Shafaeddin, Mehdi, 2010. "Trade liberalization, industrialization and development; experience of recent decades," MPRA Paper 26355, University Library of Munich, Germany.

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