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.
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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)
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