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Are Foreign and Public Capital Productive in the Mexican Case? A Panel Unit Root and Panel Cointegration Analysis

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  • Miguel D Ramirez

    (Department of Economics, Trinity College, 300 Summit street, Harford, CT 06106, USA)

Abstract

Using 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 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 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: 1960–1981 (state-led industrialization) and 1982–2001 (“neoliberal” model). The estimate for the public infrastructure capital variable clearly shows that it had a positive and relatively important economic effect during the earlier state-led import substitution industrialization (ISI) period, whereas 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 so-called neoliberal period.

Suggested Citation

  • Miguel D Ramirez, 2010. "Are Foreign and Public Capital Productive in the Mexican Case? A Panel Unit Root and Panel Cointegration Analysis," Eastern Economic Journal, Palgrave Macmillan;Eastern Economic Association, vol. 36(1), pages 70-87.
  • Handle: RePEc:pal:easeco:v:36:y:2010:i:1:p:70-87
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    Cited by:

    1. Balmori de la Miyar Jose Roberto, 2016. "The Economic Consequences of the Mexican Drug War," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 22(3), pages 213-246, August.
    2. repec:pid:journl:v:55:y:2016:i:4:p:483-497 is not listed on IDEAS
    3. Mohey-ud-din, Ghulam & Siddiqi, Muhammad Wasif, 2013. "GDP Fluctuations and Private Investment: A Macro Panel Analysis of Selected South Asian Countries," MPRA Paper 60231, University Library of Munich, Germany, revised 15 Jun 2014.
    4. repec:pje:journl:article27sumiii is not listed on IDEAS

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