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Highlights • We examine why Mexico's success as an exporter of manufactures has failed to translate into overall growth. • Our explanation hinges on the negative demand externalities of input outsourcing. • Outsourcing reduced demand for key manufacturing industries during 1980–1995 and 1995–2011. • The demand stimulus of industrial exports was lower in Mexico than in high-performing countries. • We use a model to examine the macroeconomic links between outsourcing and growth. Abstract In recent decades the Mexican economy has seen a dramatic expansion of exports of manufactured goods and imports of manufactured inputs. Mexico's integration with global production chains, however, has failed to produce sustained output and productivity growth. In this paper we propose an explanation for slow growth that hinges on the negative demand externalities of input outsourcing. We make two contributions. First, using input–output data we show that outsourcing has lowered domestic demand for the manufacturing sector, especially for capital-intensive basic industries. Second, we develop a model of outsourcing and capital accumulation and show that lower costs of outsourcing can hurt accumulation if, for the aggregate manufacturing sector, the negative effect of domestic demand shortfalls on profitability exceeds the offsetting effects of lower input costs and of export expansion. Our findings complement the broader literature on the apparent paradox of Mexico's success as an exporter of manufactures amid sluggish growth. [ABSTRACT FROM AUTHOR]

This paper examines the evolution of Mexico's labor productivity (GDP per worker) across its 32 sub-national entities from 2003 to 2013, during a period of rising drug-related crimes. Using quarterly data and economic controls, fixed effects models suggest the effects of crime are small and differ depending on whether such crimes are prosecuted by state/local or federal authorities. However, results from System Generalized Methods of Moments regressions generate stronger responses for (endogenous) wages and labor productivity. First, crime has negative effects on Mexican labor productivity across states during the 'war on drugs' period. Second, increases in expenditures on public security lead to falling labor productivity, which can be interpreted as indirect effects of crime. Third, federal authorities are found to be more effective (in not causing lower productivity) than state/local authorities. [ABSTRACT FROM AUTHOR]

Abstract: Previous studies have found that a tightening of the balance of payments (BP) constraint can explain the slowdown in Mexico's growth after its trade liberalization in the late 1980s. This paper develops a disaggregated model of the BP constraint with two types of exports (manufactures and primary commodities) and two types of imports (intermediate and final goods). Econometric estimates (including tests for structural breaks) show that the BP-equilibrium growth rate did not fall, but instead rose in the post-liberalization period, so this model cannot account for the country's growth slowdown. Instead, the analysis points to the need to consider the real exchange rate as well as internal obstacles and policies. [Copyright &y& Elsevier]

This paper examines Mexico's output convergence across its 32 states for 1993-2006, a period including the start of NAFTA. Employing dynamic panel data methods, our estimates provide interesting new results. First, we find positive rates of output absolute convergence across Mexican regions: varying from 1.5% for the years 1993-2006 to 9.4% for the years 1996-2006. Second, trade, capital inflows and international migration exert positive effects on output per capita growth. Third, rolling panels suggest the Border-North region faces increasing output convergence speed (from 8.9 to 11.2%), while the South-Center experiences a declining trend (from 12 to 7.6%) more recently. [ABSTRACT FROM AUTHOR]

Numerous applications of the balance-of-payments-constrained growth (BPCG) model have concluded that Mexico's equilibrium GDP growth rate fell after trade liberalization, because of a sharp rise in the income-elasticity of imports. Following the bounds testing approach of Pesaran et al. (), the present note estimates equations for intermediate and other types of imports in Mexico from 1960 to 2006. It shows that intermediate imports are significantly affected by manufactured exports, and that once the effect is controlled for, there is no significant rise in their income-elasticity-in contrast to what is observed for other types of imports. Since manufactured exports are highly intensive in imports, what the typical BPCG regression detects as an increase in the elasticity of intermediate imports may reflect a compositional effect, namely, the re-composition of GDP towards exports. Some implications for the BPCG model are briefly discussed in the conclusions. [ABSTRACT FROM AUTHOR]

The paper studies the effects of the real exchange rate (RER) on capital accumulation in Mexico in the period since the late 1980s. By testing for the existence of potential asymmetries, the paper seeks to clarify some of the controversies surrounding the subject. It shows the RER’s long-run effects to be qualitatively symmetric but quantitatively asymmetric; thus, while appreciations slow accumulation, depreciations accelerate it, but to a lesser degree. Depreciations, moreover, have dynamically asymmetric effects, expansionary in the long run but contractionary in the short run. The effects are derived from non-linear autoregressive distributed lag models for the private capital accumulation rate in the manufacturing, tradables, and non-tradables sectors, and for the aggregate level of private fixed investment. The results help to reconcile the contradictory conclusions reached by previous studies of Mexico, and to clarify the potential role of the real exchange rate as either barrier or engine of growth. [ABSTRACT FROM AUTHOR]