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Infrastructure and FDI Inflows into Mexico: A Panel Data Approach

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  • Mollick Andre Varella

    () (Dept of Economics and Finance, University of Texas Pan-American, Edinburg, Texas, USA)

  • Ramos-Duran Rene

    () (Industrial Development Secretariat of the Government of the State of Chihuahua, Mexico)

  • Silva-Ochoa Esteban

    () (Mckinsey & Company, Mexico City)

Abstract

In December 1993, restrictions to foreign ownership across major Mexican economic sectors were abolished. This paper studies output, industrialization intensity, ``international infrastructure", and government expenditures on infrastructure as determinants of FDI inflows into Mexican states over 1994-2001. We conduct a ``general to specific" estimation strategy across Mexican states. Telephone lines appear to be very important to FDI as their coefficients are around 2.0 in Random Effects Models. Industrialization is also important, with coefficients varying from 0.62 to 0.67. Allowing for endogeneity between FDI and real output, dynamic GMM panels confirm the robust effects of telephone lines on FDI. International infrastructure thus appears more conducive to FDI than domestic infrastructure, such as interstate and secondary roads. With international infrastructure being a major catalyst of FDI inflows into Mexico, we provide support to ongoing conventional wisdom promoting such type of investment.

Suggested Citation

  • Mollick Andre Varella & Ramos-Duran Rene & Silva-Ochoa Esteban, 2006. "Infrastructure and FDI Inflows into Mexico: A Panel Data Approach," Global Economy Journal, De Gruyter, vol. 6(1), pages 1-27, February.
  • Handle: RePEc:bpj:glecon:v:6:y:2006:i:1:n:6
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    References listed on IDEAS

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    1. Robert Scollay & John P. Gilbert, 2001. "New Regional Trading Arrangements in the Asia Pacific?," Peterson Institute Press: All Books, Peterson Institute for International Economics, number pa63.
    2. Anne O. Krueger, 1993. "Free Trade Agreements as Protectionist Devices: Rules of Origin," NBER Working Papers 4352, National Bureau of Economic Research, Inc.
    3. Anne O. Krueger, 1999. "Are Preferential Trading Arrangements Trade-Liberalizing or Protectionist?," Journal of Economic Perspectives, American Economic Association, pages 105-124.
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    Citations

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    Cited by:

    1. Escobar Gamboa, Octavio Romano, 2009. "IDE entrants, exportations et productivité manufacturière : les différentes performances des régions mexicaines," Economics Thesis from University Paris Dauphine, Paris Dauphine University, number 123456789/3850 edited by Guillochon, Bernard, March.
    2. Francois, Joseph & Manchin, Miriam, 2013. "Institutions, Infrastructure, and Trade," World Development, Elsevier, pages 165-175.
    3. C. Bellak & M. Leibrecht & R. Stehrer, 2010. "The role of public policy in closing foreign direct investment gaps: an empirical analysis," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, pages 19-46.
    4. Markus Leibrecht & Christian Bellak, "undated". "Does the impact of employment protection legislation on FDI differ by skill-intensity of sectors? An empirical investigation," Discussion Papers 09/21, University of Nottingham, GEP.
    5. Blanc-Brude, Frédéric & Cookson, Graham & Piesse, Jenifer & Strange, Roger, 2014. "The FDI location decision: Distance and the effects of spatial dependence," International Business Review, Elsevier, pages 797-810.
    6. Shah, Mumtaz Hussain, 2016. "Financial development and foreign direct investment: The case of Middle East and North African (MENA) developing nations," MPRA Paper 82013, University Library of Munich, Germany.
    7. Mina, Wasseem & Jaeck, Louis, 2015. "Labor Market Flexibility and FDI Flows: Evidence from Oil-Rich GCC and Middle Income Countries," MPRA Paper 62652, University Library of Munich, Germany.
    8. Adil Suliman & Khaled Elmawazini & Mohammed Zakaullah Shariff, 2015. "Exchange rates and foreign direct investment: evidence for sub-saharan Africa," Journal of Developing Areas, Tennessee State University, College of Business, vol. 49(2), pages 204-226, April-Jun.
    9. Primandita Fitriandi & Makoto Kakinaka & Koji Kotani, 2014. "Foreign direct investment and infrastructure development in Indonesia: Evidence from province level data," Asian Journal of Empirical Research, Asian Economic and Social Society, vol. 4(1), pages 79-94, January.
    10. Jacob A. Jordaan, 2012. "Agglomeration and the location choice of foreign direct investment: new evidence from manufacturing FDI in Mexico," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 27(1), pages 61-97.
    11. repec:dau:papers:123456789/10605 is not listed on IDEAS
    12. Octavio Escobar, 2011. "The location pattern of FDI in Mexico after NAFTA," ERSA conference papers ersa10p804, European Regional Science Association.

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