Intra- and Inter-industry Externalities from Foreign Direct Investment in the Mexican Manufacturing Sector: New Evidence from Mexican Regions

This paper presents new empirical evidence on externalities from Foreign Direct Investment (FDI) in several Mexican regions in the early 1990s. The main findings are threefold. First, the presence of FDI creates negative externalities within industries and positive externalities between industries through backward linkages. Second, FDI-externalities are stimulated by large technological differences between FDI and Mexican firms and by geographic concentration of industries. Third, we identify a substantial level of regional heterogeneity of the externality impact of FDI, in line with the notion that FDI may have contributed to processes of changing regional prosperity under trade liberalization. The findings also imply that maquiladora firms in the border states are generating positive externalities.     

Determinants of FDI-induced externalities: New empirical evidence for Mexican manufacturing industries

This paper presents new statistical evidence on foreign direct investment (FDI)-induced externalities in Mexican manufacturing industries for 1993. The new empirical results are important in three respects. First, the size of technological differences between FDI and Mexican firms is positively related to positive externalities, indicating the importance of sufficient scope of potential externalities, incentives to make externality-facilitating investments and the absence of negative competition effects. Second, geographical concentration is identified as a structural determinant of positive FDI externalities. Finally, the effect from FDI cleared from the influence of technological differences and agglomeration is the creation of positive externalities, especially when endogeneity of the foreign participation variable is controlled for.     

Trade policy and specialization in developing countries

This paper examines the impact of trade policy on specialization patterns in ten Latin American countries over the period 1985–1998. These countries are natural case studies because in the last decades they implemented comprehensive trade liberalization programs, both generally and preferentially, starting from relatively high tariff protection levels. Our econometric results suggest that reducing own most favored nation tariffs is associated with increasing manufacturing production specialization. Furthermore, we find that preferential trade liberalization and differences in the degree of unilateral openness have resulted in increased dissimilarities in manufacturing production structures across countries. These results are robust across specialization measures and estimation methods.