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The Effects of Foreign Direct Investment in Mexico since NAFTA

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  • Andreas Waldkirch

Abstract

Abstract Foreign direct investment (FDI) into Mexico has increased dramatically since the inception of the North American Free Trade Agreement (NAFTA), raising questions about its effect on the Mexican economy. This paper studies the impact of FDI on industry productivity and wages over the first 10 years of NAFTA, paying particular attention to the source country and destination industry of investments. It also offers a detailed description of the evolution of FDI, its components, sectoral composition and sources from 1994-2005. There is evidence of a positive effect of FDI on productivity, particularly total factor productivity (TFP). The effect on wages is negative or zero at best, suggesting a divergence from productivity over this time period. The positive productivity effect stems largely from US FDI into non-maquiladora industries, which receive over two-thirds of manufacturing FDI. There is no evidence that more distant source countries have a differential effect. Consistent with theoretical expectations, FDI into maquiladoras benefits unskilled workers at the expense of skilled workers. Copyright 2010 Blackwell Publishing Ltd.

Suggested Citation

  • Andreas Waldkirch, 2010. "The Effects of Foreign Direct Investment in Mexico since NAFTA," The World Economy, Wiley Blackwell, vol. 33(5), pages 710-745, May.
  • Handle: RePEc:bla:worlde:v:33:y:2010:i:5:p:710-745
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    Cited by:

    1. Nikolaos Antonakakis & Gabriele Tondl, 2011. "Do determinants of FDI to developing countries differ among OECD investors? Insights from Bayesian Model Averaging," FIW Working Paper series 076, FIW.
    2. Rafaelita M. Aldaba & Josef T. Yap, 2009. "Investment and Capital Flows : Implications of the ASEAN Economic Community," Trade Working Papers 23087, East Asian Bureau of Economic Research.
    3. repec:taf:oaefxx:v:3:y:2015:i:1:p:1095851 is not listed on IDEAS
    4. Christian Deblock & Michèle Rioux, 2010. "NAFTA – A Model Running Out of Breath?," CESifo Forum, Ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 11(4), pages 9-16, December.
    5. repec:dau:papers:123456789/10605 is not listed on IDEAS
    6. Jose Romero, 2012. "Inversión extranjera directa y crecimiento económico en México: 1940-2010," Serie documentos de trabajo del Centro de Estudios Económicos 2012-12, El Colegio de México, Centro de Estudios Económicos.
    7. Zhang, Cheng & Guo, Bingnan & Wang, Jianke, 2014. "The different impacts of home countries characteristics in FDI on Chinese spillover effects: Based on one-stage SFA," Economic Modelling, Elsevier, vol. 38(C), pages 572-580.
    8. Víctor Hugo Torres Preciado & Mayrén Polanco Gaytán & Miguel A. Tinoco Zermeño, 2017. "Dynamic of foreign direct investment in the states of Mexico: An analysis of Markov's spatial chains," Contaduría y Administración, Accounting and Management, vol. 62(1), pages 163-183, Enero-Mar.
    9. Parajuli, Shanta & Kennedy, P. Lynn, 2010. "The Exchange Rate and Inward Foreign Direct Investment in Mexico," 2010 Annual Meeting, February 6-9, 2010, Orlando, Florida 56459, Southern Agricultural Economics Association.
    10. Cesaire, Chiatchoua & Santabárbara-Sabino, Alejandro Mario, 2015. "Inversión extranjera directa y empleo en el Estado de México: ¿Qué distribución sectorial?," eseconomía, Escuela Superior de Economía, Instituto Politécnico Nacional, vol. 0(42), pages 33-50, primer se.
    11. Chan Sok GEE & Mohd Zaini Abd KARIM, 2011. "Fdi´S Country Of Origin And Output Growth: The Case Of Malaysia?S Manufacturing Sector, 1991-2006," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 11(1).
    12. Víctor Hugo Torres Preciado & Mayrén Polanco Gaytán & Miguel A. Tinoco Zermeño, 2017. "Dinámica de la inversión extranjera directa en los estados de México: un análisis de cadenas de Markov espaciales," Contaduría y Administración, Accounting and Management, vol. 62(1), pages 141-162, Enero-Mar.

    More about this item

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements

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