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Foreign direct investment, public investment and growth: evidence from the regions in Mexico, 2006-2015

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  • Alfonso Mendoza-Velázquez
  • Luis David Conde Cortés

Abstract

This paper examines the dynamic association between foreign direct investment (FDI), public investment of local governments (IPUB) and economic growth for the 32 states in Mexico grouped by region and level of competitiveness for the 2006-2015 period. In particular, we examine the crowding-in and crowdingout effects of the two types of investments, as well as their impact on economic growth. We employ a panel data vector autorregression (VARP) model from which we obtain evidence indicating that IPUB shocks have a negative impact on the response of IED and also that IPUB responds positively, but weakly to FDI. We also find a negative and significant response of regional GDP growth to IPUB shocks, particularly in the north of Mexico. Finally, we find that shocks to FDI do not encourage GDP growth and that states in the south even experience negative rates of growth of per capita GDP.

Suggested Citation

  • Alfonso Mendoza-Velázquez & Luis David Conde Cortés, 2019. "Foreign direct investment, public investment and growth: evidence from the regions in Mexico, 2006-2015," Estudios de Economia, University of Chile, Department of Economics, vol. 46(2), pages 191-225, December.
    • Handle: RePEc:udc:esteco:v:46:y:2019:i:1:p:191-225
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    File URL: https://estudiosdeeconomia.uchile.cl/index.php/EDE/article/view/55273/58217
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    Cited by:

    1. Alfonso Mendoza-Velázquez & Alejandro Rondero-Garcia & Luis David Conde-Cortés, 2021. "Foreign Direct Investment and Employment Growth in the States of Mexico: Competitiveness and Social Progress," International Regional Science Review, , vol. 44(6), pages 709-730, November.

    More about this item

    Keywords

    Inversión extranjera directa; inversión pública local; crecimiento regional; crowding in; crowding out;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures

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