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NAFTA and Manufacturing Productivity in Mexico

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  • Ernesto López-Córdova

Abstract

Using a panel of Mexican manufacturing plants over the period 1993-1999, I estimate total factor productivity (TFP) at the plant level and study its evolution in the face of trade and investment liberalization under the North American Free Trade Agreement. I implement the Olley-Pakes (1996) algorithm on the data to correct for simultaneity and sample selection problems a¤ecting OLS estimates. I then relate the evolution of TFP over the period to tariff levels in Mexico and the United States, import penetration, exporting activities, imported inputs use and foreign capital participation. I ...nd that increased import competition and access to the U.S. market have had a positive impact on TFP. Foreign capital also has had a positive impact on TFP, but intra-industry spillovers are negative. Last, there is no clear evidence regarding the impact from the use of imported inputs or from exporting operations.

Suggested Citation

  • Ernesto López-Córdova, 2003. "NAFTA and Manufacturing Productivity in Mexico," Economía Journal, The Latin American and Caribbean Economic Association - LACEA, vol. 0(Fall 2003), pages 55-98, August.
    • Handle: RePEc:col:000425:008679
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    Cited by:

    1. M Ayhan Kose & Eswar Prasad & Kenneth Rogoff & Shang-Jin Wei, 2009. "Financial Globalization: A Reappraisal," IMF Staff Papers, Palgrave Macmillan, vol. 56(1), pages 8-62, April.
    2. Miguel Fuentes & Pablo Ibarrarán, 2012. "Firm dynamics and real exchange rate fluctuations: Does trade openness matter? Evidence from Mexico's manufacturing sector," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 21(3), pages 409-469, May.
    3. Haltiwanger, John & Kugler, Adriana & Kugler, Maurice & Micco, Alejandro & Pagés, Carmen, 2004. "Effects of tariffs and real exchange rates on job reallocation: evidence from Latin America," Discussion Paper Series In Economics And Econometrics 0410, Economics Division, School of Social Sciences, University of Southampton.
    4. De Hoyos, Rafael E. & Iacovone, Leonardo, 2013. "Economic Performance under NAFTA: A Firm-Level Analysis of the Trade-productivity Linkages," World Development, Elsevier, vol. 44(C), pages 180-193.
    5. Hugo Rojas-Romagosa, 2006. "Productivity Effects of FDI Inflows: A Literature Review," CPB Memorandum 170, CPB Netherlands Bureau for Economic Policy Analysis.
    6. Mamatzakis, E. & Tsionas, M., 2018. "Revisiting the returns of public infrastructure in Mexico: A limited information local likelihood estimation," Economic Modelling, Elsevier, vol. 75(C), pages 132-141.
    7. Nikita Céspedes & Maria E. Aquije & Alan Sánchez & Rafael Vera-Tudela, 2014. "Productividad y tratados de libre comercio a nivel de empresas en Perú," Working Papers 27, Peruvian Economic Association.
    8. 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.
    9. Carlos Felipe Jaramillo & Daniel Lederman & Maurizio Bussolo & David Gould & Andrew Mason, 2006. "Challenges of CAFTA : Maximizing the Benefits for Central America," World Bank Publications - Books, The World Bank Group, number 7127.
    10. Amirul Islam & Ruhul Salim & Harry Bloch, 2016. "Does Regional Integration Affect Efficiency And Productivity Growth? Empirical Evidence From South Asia," Review of Urban & Regional Development Studies, Wiley Blackwell, vol. 28(2), pages 107-122, July.
    11. Kosteas, Vasilios D., 2008. "Trade Protection and Capital Imports in the Mexican Manufacturing Sector," World Development, Elsevier, vol. 36(12), pages 2822-2837, December.
    12. Hernando Zuleta & Orlando Gracia, 2004. "The Free Trade Agreement between Colombia and USA: What can happen to Colombia?," Investigación Económica en Colombia 3594, Fundación Pondo.
    13. Iacovone, Leonardo, 2012. "The better you are the stronger it makes you: Evidence on the asymmetric impact of liberalization," Journal of Development Economics, Elsevier, vol. 99(2), pages 474-485.
    14. Octavio Escobar, 2011. "The location pattern of FDI in Mexico after NAFTA," ERSA conference papers ersa10p804, European Regional Science Association.
    15. 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.
    16. François Bourguignon & Maurizio Bussolo & Luiz A. Pereira da Silva, 2008. "The Impact of Macroeconomic Policies on Poverty and Income Distribution : Macro-Micro Evaluation Techniques and Tools," World Bank Publications - Books, The World Bank Group, number 6586.
    17. Carsten Eckel, 2009. "Endogenous Sunk Costs, Flexible Manufacturing and the Productivity Effects of International Trade," Scandinavian Journal of Economics, Wiley Blackwell, vol. 111(2), pages 369-386, June.
    18. Juan Carlos Chávez Martín del Campo & Luis Fernando López Ornelas, 2014. "Un enfoque no paramétrico para la descomposición de la productividad del trabajo en la industria manufacturera regional," Ensayos Revista de Economia, Universidad Autonoma de Nuevo Leon, Facultad de Economia, vol. 0(2), pages 33-58, November.
    19. Chávez Juan Carlos & Fonseca Felipe J., 2012. "Technical and Structural Efficiency in Mexican Manufacturing: A Regional Approach," Working Papers 2012-03, Banco de México.

    More about this item

    Keywords

    NAFTA; trade liberalization; manufacturing; productivity; foreign directinvestment;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration

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