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The NAFTA tide: Lifting the larger and better boats

Author

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  • Angel Calderon-Madrid
  • Alexandru Voicu

Abstract

We use panel data on Mexican manufacturing plants to study the connection between plants' responses to changes in the economic environment and their contributions to aggregate total factor productivity growth, in the period following the implementation of the North American Trade Agreement. An overwhelming share of industry-level aggregate total factor productivity growth is accounted for by a small number of plants, which were larger and more productive before the implementation of NAFTA and expanded and became more productive following the implementation of NAFTA. Plants that exported before NAFTA and exported continuously through to 2000, and new exporters, are more likely to be among the top-performing plants. The performance of plants with similar exporting experience displays, however, remarkable heterogeneity: a significant number of plants that never export have strong output and productivity performance, while many exporters display poor performance. Spending on research and development, and three variables describing plants' level of integration in the global markets - foreign direct investment, use of imported intermediary inputs, and investment in foreign capital goods - are positively correlated with output and productivity performance.

Suggested Citation

  • Angel Calderon-Madrid & Alexandru Voicu, 2011. "The NAFTA tide: Lifting the larger and better boats," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 20(4), pages 467-505.
  • Handle: RePEc:taf:jitecd:v:20:y:2011:i:4:p:467-505
    DOI: 10.1080/09638190903191773
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    References listed on IDEAS

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    1. Bernard, Andrew B. & Bradford Jensen, J., 1999. "Exceptional exporter performance: cause, effect, or both?," Journal of International Economics, Elsevier, vol. 47(1), pages 1-25, February.
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    More about this item

    Keywords

    NAFTA; trade liberalization; total factor productivity; heterogeneity of plant-level performance;

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • O54 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean

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