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Integration, Productivity, and Inclusion in Mexico: A Macro Perspective

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Innovation and Inclusion in Latin America

Part of the book series: Studies of the Americas ((STAM))

Abstract

Among the larger Latin American nations, Mexico stands out for attempting to escape the middle-income trap through a development strategy focused on economic integration. By joining the General Agreement on Tariffs and Trade (GATT, the predecessor to the World Trade Organization) in 1986, enacting the North American Free Trade Agreement (NAFTA) in 1994, and signing numerous other trade agreements since then, the Mexican government has transformed what was once a relatively closed economy into one of the world’s most open and export-oriented ones. As a result of these trade policies together with a set of domestic reforms, Mexico has become one of the world’s leading exporters of manufactured goods in general and of relatively advanced product categories in particular. Manufactures now account for about 80 % of Mexican exports, and about three-quarters of these consist of machinery and equipment broadly defined—including large volumes of automotive and electronic products, and small but growing amounts of aerospace equipment, biotechnology products, and information technology. Mexican industries have become deeply integrated into global value (supply) chains, especially within North America and increasingly with East Asia and other world regions.

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Notes

  1. 1.

    See Esquivel and Rodríguez-López (2003), Verhoogen (2008), Carrillo et al. (2012), and Carrillo and Gomis (2014), among many others.

  2. 2.

    Data from Ibarra and Blecker (2015), who took the export data from the Mexican Instituto Nacional de Economía y Estadística (INEGI, www.inegi.org.mx). Nominal exports in US dollars were converted to real volumes of exports using the US producer price index for industrial commodities from US Bureau of Labor Statistics (BLS), www.bls.gov.

  3. 3.

    This figure for 2012 is taken from the World Bank’s World Development Indicators online database, and is used for international comparative purposes. According to the Mexican data source (INEGI) cited in the previous note, the figure was closer to 80 %.

  4. 4.

    We focus on nonpetroleum imports here to make the Mexican share more comparable to the Chinese share, because China does not export petroleum to the United States. Growth rates are computed using real nonpetroleum imports measured at chained 2009 prices.

  5. 5.

    See, among others, Gallagher et al. (2008), Feenstra and Kee (2009), Hanson and Robertson (2009), and Dussel Peters and Gallagher (2013).

  6. 6.

    The Mexican trade data discussed in this paragraph are drawn from Blecker (2014a, b), who in turn obtained the data from INEGI.

  7. 7.

    Correlation coefficients and growth rates for industrial production are author’s calculations from the same data sources given for Fig. 7.2. I am indebted to Gerardo Esquivel for suggesting this way of analyzing Mexican–US economic integration and for supplying historical data for Mexico.

  8. 8.

    Author’s calculations based on data from INEGI and the US Bureau of Economic Analysis (BEA, www.bea.gov).

  9. 9.

    Based on data from Timmer and de Vries (2007), labor productivity in Mexican services fell from 60 to 38 (in thousands of constant 1993 pesos per employee) between 1971 and 1995, and then increased but only to 43 (in the same units) from 1995 to 2005.

  10. 10.

    Data on productivity at the sectoral level for 16 Asian and Latin American nations were obtained from the Groningen Growth and Development Centre (GGDC) 10-Sector Database, which applies a common methodology to all countries—but, unfortunately, provides data only through 2005. The methodology is described in Timmer and de Vries (2007); the data are available at http://www.rug.nl/research/ggdc/data/10-sector-database.

  11. 11.

    Bolio et al. (2014) use the Economic Censuses of 1999 and 2009 which, in reality, are based on data for 1998 and 2008. These censuses exclude the agricultural and government sectors.

  12. 12.

    In this study, multinational enterprises are defined as conducting innovation in Mexico if they satisfy the following criteria in their Mexican affiliates or subsidiaries: “(a) they have an R&D department or unit, (b) they recognize that the R&D activity they realize [in Mexico] is used in other affiliates [in other countries], (c) they have linkages with educational centers for developing R&D in Mexico, and (d) they have sought government support for these same ends” (Carrillo and Gomis 2014: 398, author’s translation).

  13. 13.

    Note that we attribute the Economic Census data here to the years in which the data were gathered, rather than the years in which the censuses were released as in Bolio et al. (2014) (see previous note). Complete data for 2000 are not available as only quinquennial Census data are available prior to 2007, but the data for the maquiladoras—where most of the job growth occurred—indicate that employment continued increasing until 2000.

  14. 14.

    Author’s calculations based on data for 1993–2012 from World Bank, World Development Indicators, online database, http://databank.worldbank.org/data/home.aspx.

  15. 15.

    Author’s calculations from INEGI’s Encuesta Mensual de la Industrial Manufacturera (EMIM), http://www.inegi.org.mx/sistemas/bie/.

  16. 16.

    See also Moreno-Brid et al. (2005) and Fujii Gambero and Cervantes-Martínez (2013).

  17. 17.

    Data from INEGI. Due to small surpluses with other nations, mainly in Latin America, Mexico’s overall deficit in goods trade for 2013 was only $1 billion.

  18. 18.

    Based on author’s analysis of INEGI data.

  19. 19.

    Although this is an admittedly imperfect measure, the distinction between nonproduction and production workers correlates well with the distinction between employees with higher and lower levels of educational attainment, and data by educational level are not readily available for the manufacturing sector. The data given here are author’s calculations based on various surveys of the manufacturing sector available from INEGI’s Banco de Información Económica, http://www.inegi.org.mx/sistemas/bie/.

  20. 20.

    A fourth measure, expenditure-side real GDP per person at chained PPPs, is almost identical to the similar measure at current PPPs, and hence is omitted to avoid cluttering the graph. For a similar analysis using earlier versions of the PWT and other data sources, see Blecker and Esquivel (2013).

  21. 21.

    Source: BLS, “International Comparisons of Hourly Compensation Costs in Manufacturing, 2012”, August 9, 2013, and author’s calculations.

  22. 22.

    Hanson (2006: 898–899) notes that, contrary to popular perceptions, “individuals with moderate to high education levels have the highest likelihood of migrating abroad.”

  23. 23.

    For various perspectives on Mexico’s macroeconomic policies and the causes of its slow growth in recent years see, among others, Levy and Walton (2009), Moreno-Brid and Ros (2009), Arias et al. (2010), Hanson (2010), and Ros (2013).

  24. 24.

    Much recent research finds that, more generally, greater distributional equity and sustained rapid growth are compatible in the long run. See, for example, Berg et al. (2012) and Lee (2013).

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Acknowledgments

The author gratefully acknowledges helpful comments from Antoni Estevadeordal, Eric Hershberg, Carlos Ibarra, Julio López, Jaime Ros, and Barbara Stallings on earlier drafts. The usual caveats apply.

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  1. Economics, American University, Washington, DC, US

    Robert A. Blecker

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  1. Cieplan, Santiago, Chile

    Alejandro Foxley

  2. International & Public Affairs, Brown University, Watson Institute of, PROVIDENCE, Rhode Island, USA

    Barbara Stallings

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Blecker, R.A. (2016). Integration, Productivity, and Inclusion in Mexico: A Macro Perspective. In: Foxley, A., Stallings, B. (eds) Innovation and Inclusion in Latin America. Studies of the Americas. Palgrave Macmillan, New York. https://doi.org/10.1057/978-1-137-59682-6_7

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