Are Foreign and Public Capital Productive in the Mexican Case? A Panel Unit Root and Panel Cointegration Analysis
AbstractUsing panel data, this paper tests whether foreign, public, and private capital have a positive and significant effect on aggregate output and labor productivity for Mexico during the 1960-2001 period. The richer information set made possible by the sectorial data enables this study to utilize the methodologically sound "group-mean" Fully Modified Ordinary Least Squares (FMOLS) procedure developed by Pedroni to generate consistent estimates of the relevant panel variables in the cointegrated production (labor productivity) function. The results suggest that, in the long run, changes in the stocks of public and private capital and the economically active population (EAP) have a positive and economically significant effect on output (and labor productivity) in all sectors. By contrast, changes in the stocks of foreign capital have a mixed effect, with a negative and statistically significant effect on output (and labor productivity) in the services sector; a positive and economically significant impact on output (labor productivity) in the industrial sector, and a positive but insignificant effect on output (labor productivity) in the primary sector. The period is also broken down into two sub-periods: 1960-81 (state-led industrialization) and 1982-2001 ("neoliberal" model). The estimate for the public capital variable clearly shows that it had a positive and relatively important economic effect during the earlier state-led period, while the private capital variable remains positive and significant in both periods. The foreign capital variable has a positive and highly significant effect during the ISI period, but, turns unexpectedly negative and economically significant in the neoliberal period.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Yale University, Department of Economics in its series Working Papers with number 49.
Date of creation: May 2008
Date of revision:
Find related papers by JEL classification:
- C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-02-07 (All new papers)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Peter Pedroni, 2001.
"Purchasing Power Parity Tests in Cointegrated Panels,"
Department of Economics Working Papers
2001-01, Department of Economics, Williams College.
- Peter Pedroni, 2001. "Purchasing Power Parity Tests In Cointegrated Panels," The Review of Economics and Statistics, MIT Press, vol. 83(4), pages 727-731, November.
- Tom Doan, . "PANELDOLS: RATS procedure to perform panel data group mean DOLS," Statistical Software Components RTS00150, Boston College Department of Economics.
- Tom Doan, . "PANELFM: RATS procedure to perform panel data group mean FMOLS," Statistical Software Components RTS00151, Boston College Department of Economics.
- Kaddour Hadri, 1999. "Testing The Null Hypothesis Of Stationarity Against The Alternative Of A Unit Root In Panel Data With Serially Correlated Errors," Research Papers 1999_05, University of Liverpool Management School.
- Reinhart, Carmen & Khan, Mohsin, 1989.
"Private investment and economic growth in developing countries,"
13655, University Library of Munich, Germany.
- Khan, Mohsin S. & Reinhart, Carmen M., 1990. "Private investment and economic growth in developing countries," World Development, Elsevier, vol. 18(1), pages 19-27, January.
- Pasaran, M.H. & Im, K.S. & Shin, Y., 1995.
"Testing for Unit Roots in Heterogeneous Panels,"
Cambridge Working Papers in Economics
9526, Faculty of Economics, University of Cambridge.
- Pedroni, Peter, 1999.
" Critical Values for Cointegration Tests in Heterogeneous Panels with Multiple Regressors,"
Oxford Bulletin of Economics and Statistics,
Department of Economics, University of Oxford, vol. 61(0), pages 653-70, Special I.
- Peter Pedroni, 1999. "Critical Values for Cointegration Tests in Heterogeneous Panels with Multiple Regressors," Department of Economics Working Papers 2000-02, Department of Economics, Williams College.
- Joshua Greene & Delano Villanueva, 1991. "Private Investment in Developing Countries: An Empirical Analysis," IMF Staff Papers, Palgrave Macmillan, vol. 38(1), pages 33-58, March.
- Miguel Ramirez, 2002. "Public capital formation and labor productivity growth in Mexico," Atlantic Economic Journal, International Atlantic Economic Society, vol. 30(4), pages 366-379, December.
- David A. Aschauer, 1989. "Public investment and productivity growth in the Group of Seven," Economic Perspectives, Federal Reserve Bank of Chicago, issue Sep, pages 17-25.
- Dreger, Christian & Reimers, Hans-Eggert, 2005.
"Health Care Expenditures in OECD Countries: A Panel Unit Root and Cointegration Analysis,"
IZA Discussion Papers
1469, Institute for the Study of Labor (IZA).
- Dreger, C. & Reimers, H.E., 2005. "Health Care Expenditures in OECD Countries: A Panel Unit Root and Cointegration Analysis," International Journal of Applied Econometrics and Quantitative Studies, Euro-American Association of Economic Development, vol. 2(2), pages 5-20.
- J. M. Albala-Bertrand & E. C. Mamatzakis, 2001. "Is public infrastructure productive? Evidence from Chile," Applied Economics Letters, Taylor & Francis Journals, vol. 8(3), pages 195-198.
- Nora Lustig, 2001. "Life Is Not Easy: Mexico's Quest for Stability and Growth," Journal of Economic Perspectives, American Economic Association, vol. 15(1), pages 85-106, Winter.
- Luiz de Mello, 1997. "Foreign direct investment in developing countries and growth: A selective survey," Journal of Development Studies, Taylor & Francis Journals, vol. 34(1), pages 1-34.
- Maddala, G S & Wu, Shaowen, 1999. " A Comparative Study of Unit Root Tests with Panel Data and a New Simple Test," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(0), pages 631-52, Special I.
- Granger, C. W. J. & Newbold, P., 1974. "Spurious regressions in econometrics," Journal of Econometrics, Elsevier, vol. 2(2), pages 111-120, July.
- Cardoso, Eliana, 1993. "Private Investment in Latin America," Economic Development and Cultural Change, University of Chicago Press, vol. 41(4), pages 833-48, July.
- Nader Nazmi & Miguel D. Ramirez, 1997. "Public And Private Investment And Economic Growth In Mexico," Contemporary Economic Policy, Western Economic Association International, vol. 15(1), pages 65-75, 01.
- Nicholas Apergis & Costantinos Katrakilidis & Nikolaos Tabakis, 2006. "Dynamic Linkages between FDI Inflows and Domestic Investment: A Panel Cointegration Approach," Atlantic Economic Journal, International Atlantic Economic Society, vol. 34(4), pages 385-394, December.
- Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March.
- M. Ramirez, 2000. "Foreign Direct Investment in Mexico: A Cointegration Analysis," Journal of Development Studies, Taylor & Francis Journals, vol. 37(1), pages 138-162.
- Hermes, Niels & Lensink, Robert, 2001. "Fiscal Policy and Private Investment in Less Developed Countries," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.