The weak linkages between processing exports and the internal economy. The Mexican case

The aim of this paper is to show the internal linkages of manufacturing exports and the rest of the economy. We take the Mexican economy as the case of study. Manufacturing exports constitute the most of exports and processing exports (maquiladora) represent an important part of them. We consider the indirect domestic value added contained in Mexican manufacturing exports, dividing them into exports from the internal economy and the maquiladora industry. We show that the internal backward linkages of exports are weak, that only a few sectors produce inputs for exports, and that the forward linkages are weak too because the Mexican maquiladora industry assembles imported parts and components into final goods for export. The actual picture is quite different from that presented by Hirschman [(1958) The Strategy of Economic Development. New Haven, Yale University Press], who argued that the manufacturing sector plays a key role to promote economic growth because of its dense forward and backward internal linkages.     

Mexican Maquiladoras and the North American Free Trade Area

The maquiladora program has been in existence for nearly three decades. Understanding the concept of maquiladoras, how they are established, their benefits and harms to the US., Mexico and to other countries and how they are impacted by the Free Trade Agreement between the United States, Canada and Mexico, are of utmost importance to international marketers and policy makers all over the world In this paper, the history, the present state and the future potential of the maquiladora program is discussed and the process of establishing a maguiladora is presented. Maquiladoras influence the process of Mexican-American-Canadian multilaleral invesanent and trade relationshin Even though the North American Free Trade Area (NAFTA) is expected to reduce their importance for American and Canadian companies, we argue here that maquiladoras will remain a significant part of the Mexican manufacturing sector and will continue to attract Pacific and European investments seeking inexpensive labor, oil and other basic resources, god manufacturing environment and significant consumers markets, all in one place. Maquiladuras may indeed change ownership but will remain a significant contributor to the economy of Mexico for years to come.     

Structural analysis of international trade: Environmental impacts of Norway

Final demand purchases initiate production processes that ultimately lead to environmental impacts. With the increase in international trade, many production processes occur outside of the country of final consumption. Whilst several studies have evaluated the pollution embodied in consumption and trade flows, few studies have investigated the structural linkages between domestic consumption and production in foreign regions. In this article we apply three complementary approaches to study the production network leading from the Norwegian economy to domestic and international environmental impacts: (1) the consumption perspective identifies final demand purchases that produce environmental impacts; (2) the production perspective identifies the production processes generating the pollution for a given demand; and (3) structural path analysis is used to provide the linkages between the global production networks linking consumption and production. We find that the three approaches provide different, but complementary information. For policy to focus on both sustainable consumption and production, all three approaches are required to fully identify environmentally important sectors in an economy.     

Measuring China’s domestic production networks through Trade in Value-added perspectives

Evaluating the role and performance of China's participation in Global value chains (GVCs) has been a hot policy and research issue in recent years. However, most GVCs-related literature about China focuses on country-to-country relations; less attention has been paid to China's domestic value chains (DVCs). GVCs should have their domestic foundations since strong linkages across domestic firms and regions can improve productivity through gains from specialization, which make domestic industries more competitive in GVCs in turn. This paper applies the so-called Trade in Value-added (TiVA) concept and the decomposition of domestic-regional trade in TiVA terms to re-measure the inter-industrial and interregional linkages in China's DVCs. We show that TiVA-based measures can significantly enrich our understanding on both the structure change of China's regional economy and the position and participation degree of Chinese regions in DVCs.     

Trade and factor intensity,and the transmission of the global shock to labor: A panel analysis of the fall of the labor income share in the Mexican manufacturing sector

The paper studies the fall of the labor income share in Mexico, contrasting the role of trade and factor intensity as transmission channels of the China shock of 2001. It finds that, while the skill, technological and —more surprisingly— trade intensity of Mexican industries were largely irrelevant, capital intensity played a key role: in particular, the higher was the industries’ initial capital intensity, the more vulnerable they were to the transmission of the global shock to labor. The finding is consistent with the proposition that industrial integration, concentrated in industries that are capital-intensive from the perspective of developing countries, facilitated the transmission of the shock. Results come from the estimation of panel equations for the annual change in the labor share across Mexican manufacturing industries, where transmission is measured by the correlation between changes in the United States and Mexican industry labor shares.     

DO WATER-RICH REGIONS HAVE A COMPARATIVE ADVANTAGE IN FOOD PRODUCTION? IMPROVING THE REPRESENTATION OF WATER FOR AGRICULTURE IN ECONOMIC MODELS

With growing demand for fresh water and uncertain supplies, there is an increasing concern about future water scarcity. Since most freshwater withdrawals are for agriculture, reliance on water embodied in imported food (trade in ‘virtual water’) is a possible strategy to provide food to water-stressed regions while conserving their scarce supply for other purposes. To evaluate this proposition, we extend a model of interregional trade by (1) defining endowments of water that cannot be exceeded, (2) allowing simultaneous operation of rainfed and irrigated agriculture, and (3) distinguishing sub-regional endowments within a larger economic region. An application to the Mexican economy compares region-specific water abundance with economic comparative advantage under alternative scenarios. We conclude that the water-rich regions of Mexico are relatively high-cost producers of food and that they do not pick up the slack even when the lowest-cost Mexican regions are constrained by binding water constraints.     

Employee work values and organizational attachment in North Mexican maquiladoras

Maquiladoras in Northern Mexico are currently plagued by low organizational attachment among production workers. Workers often feel little psychological commitment to their maquiladora, and turnover rates in the plants average about 10 per cent per month. In this study we examine the role that work values play in maquiladora workers' attachment to their organizations. An analysis of data from 227 production workers in two maquiladoras reveals that the upward-striving value (a desire continually to seek a higher-level job) is positively associated with turnover intentions and negatively associated with organizational commitment, while the social-status-of-job value (the perception that a good job merits respect) is positively associated with organizational commitment. The findings offer guidance to managers and management scholars attempting to understand and combat the organizational attachment problem in Northern Mexico.     

AN INPUT–OUTPUT STUDY OF THE SINGAPORE INFORMATION SECTOR

The development and use of information and communication technologies is one of the key drivers of the ‘knowledge economy.’ In this paper, we investigate the impact of information technology on the output growth of the Singapore economy using the input–output framework. The input–output framework allows us to understand the impact of information sector in an integrated framework in terms of its linkages to the manufacturing and service sectors. In particular, we adopt the input–output approach to shed light on both production and diffusion activities of the information sector on the Singapore economy. The results indicate that the ICT sector provided the key linkages for the expansion of high-value added manufacturing activities and electronics export for the Singapore economy.     

Industry trade between Canada and Mexico: Will a weakening peso help Mexican manufacturing in the long run?

Mexico has longed served as one of Canada's major trade partner, but the plunging peso has had drastic effects across North America. This study investigates the bilateral trade relationship between Canada and Mexico for 27 individual industries, from 1973 to 2006. Cointegration analysis shows that overall sensitivity to the real exchange rate is weak, but that the trade balances of certain manufacturing industries do indeed improve after a currency depreciation. The “J-curve” effect is present for certain electrical and mechanical industries, suggesting that the recent decline of the peso may currently be having a negative impact on Mexican trade—but that it might eventually be beneficial, particularly for the Machinery and Transport Equipment sector.     

Strategic international human resource management approaches in the maquiladora industry: a comparison of Japanese,Korean and US firms

The maquiladora option has made Mexico an increasingly attractive off-shore manufacturing site for multinational enterprises (MNEs) seeking global competitiveness. However, MNEs often encounter human resource management (HRM) challenges as they attempt to leverage these maquiladora benefits. MNEs use three approaches to international human resource management (IHRM) design in addressing these challenges – a mechanistic, ‘control’ approach; a paternalistic, ‘human relations’ approach; and a developmental, ‘human resource’ approach. This paper compares and contrasts these IHRM design approaches in Japanese, Korean and US maquiladora manufacturing operations in Mexico, identifies implications for the management of diversity based on these findings, and discusses the related competitiveness implications.     

The integration of international financial markets: an attempt to quantify contagion in an input–output-type analysis

ABSTRACT

The increasing integration of international financial markets means that credit defaults in one country have to be covered by creditors in other countries. If the principle of creditor liability were applied systematically, the financial losses incurred by the financial institution that provided the credit and is thus directly affected by the default would be ‘passed on’ through its domestic and foreign shareholders and debt holders, as well as their creditors, to the original savers. In this paper, this contagion effect will be estimated by taking international capital linkages into account. Analogously to an input–output analysis of inter-industry linkages, savings used for investments in one country are traced back to the countries from which the funds originated. This also reveals the important role of international financial centers, which essentially serve as distributors of investment risks, while the financial losses are ultimately borne by larger countries with higher levels of savings.     

Spatial distribution of economic activities: a network approach

The aim of this paper is to analyse co-location patterns of manufactures and service industries at a microgeographic level using Spanish data from the Mercantile Register. Our approach allows us to analyse joint-location and co-location patterns of firms in different industries, and to overcome previous technical constraints in this type of analyses, partially thanks to using homogeneous cells instead of administrative units. This paper contributes to the empirical literature on industry location by developing a multisectorial co-location index computed by comparing differences between observed data about firms’ location and randomly generated data. Multisectorial relationships are analyzed by transposing bilateral relations onto an n-dimensional space. Our results show that dispersed industries tend to locate jointly and that industries with lower joint-location patterns have spatial structures similar to those obtained through input–output relationships, suggesting weak role of co-location patterns as interindustry linkages are not the main location determinants.

     

Promoting investment in the Turkish construction sector: a structural path analysis

The construction sector in Turkey boomed in the period between the turn of the millennium and the onset of the global crisis. This paper studies the employment generation effects of growth of this sector, taking into account that it not only depends on domestic production factors but also on imported inputs. In order to unravel the interactions of the construction sector with the rest of the economy, structural path analysis of both labour and imported intermediate input demand generation is used based on the 2002 and 2009 WIOD data for Turkey. The findings indicate that labour linkages weakened between 2002 and 2009, while import linkages became slightly stronger. The sectors that have played key roles in this are identified, as are the linkages between these. The findings have implications for the persistent unemployment and current account deficits in Turkey.     

International Franchising Practices in Mexico: Do Franchisors Customize Their Contracts?

The contracting practices of franchisors outside their domestic market have received little attention in the empirical literature on franchising to date, largely because of lack of data. We exploit a novel data set that allows us to describe the contracts offered by a number of US and Canadian franchisors operating in Mexico and also compare them to contracts employed at home. Our analyses reveal a series of stylized facts that we hope will prove useful in guiding future empirical and theoretical research on contracting and especially on cross-border contracting practices. These are as follows: (1) The overwhelming majority of franchisors seeking franchisees in Mexico offer exactly the same contract to potential Mexican franchisees as that employed in the home market; (2) Among those franchisors that already have established outlets in Mexico, nearly half use the exact same fees in Mexico and at home; (3) The majority of those franchisors that make changes only alter the fixed fee component of the contract; (4) There is no evidence that franchisors use franchising more or less in Mexico compared to home as an alternative to royalty rate customization—in fact, the extent of franchising (versus company-owned units) of these firms in Mexico is not different systematically from that observed in their domestic market or worldwide; and (5) There is no evidence of increased customization over time—if anything, the evidence suggests increased similarities in contracting practices over time.     

Trade Liberalization and Pollution: An Input–Output Study of Carbon Dioxide Emissions in Mexico

This paper examines the environmental effects associated with Mexico's participation in the North American Free Trade Agreement (NAFTA). The objective is to provide quantitative estimates of carbon dioxide (CO₂) emissions from changes in the level and structure of production and consumption activity in Mexico following a liberalization of trade. The quantitative analysis was performed using input–output methods with fuel use modifications to account for CO₂ emissions before and after NAFTA's implementation. As a result of NAFTA, CO₂ emissions are expected to increase from the anticipated increase in the size of the Mexican economy. While total emissions increase as a result of tariff elimination, there is also a shift in the structure of production and final consumption away from those sectors that are the most C02 intensive.     

全球化背景下中国行业间工资增长差异的演变及其原因

借助非竞争型投入产出模型,从国民经济投入产出系统的角度分析1987~2007年全球化背景下中国行业工资增长的差异及其原因。研究表明,1987~2007年我国资本密集型产业、劳动密集型产业、服务业的行业人均工资增长表现出极大的差异性。究其原因,在不同阶段国内消费、投资、出口、技术进步等因素对行业工资的不同拉动效应,是导致近年来中国行业间工资增长差异迅速扩大的重要原因。行业层面的结果分解表明,1997年以后驱动我国各行业人均工资增长的动力来源发生了根本变化,出口对我国第二产业、劳动密集型产业行业工资增长的贡献显著上升,而国内消费和国内投资对第一、三产业、资本密集型产业以及垄断性行业工资增长的贡献显著上升。     

ON BRÓDY'S CONJECTURE: THEORY,FACTS AND FIGURES ABOUT INSTABILITY OF THE US ECONOMY

Bródy's conjecture regarding the instability of economies is submitted to an empirical test using input–output flow tables of varying size for the US economy, for the benchmark years 1997 and 2002, as well as for the period 1998–2011. The results obtained using input–output tables of various dimensions lend support to the view of increasing instability (in the sense of Bródy) of the US economy over the period considered. Furthermore, our analysis shows that only a few vertically integrated industries are enough to shape the behaviour of the entire economy in the case of a disturbance. These results may usefully be contrasted with those derived in a parallel literature on aggregate fluctuations from microeconomic ‘idiosyncratic’ shocks.     

Input–Output Anatomy of China's Energy Use Changes in the 1980s

China significantly reduced the energy intensity of its economy in the 1980s. In this paper, we conduct a structural decomposition analysis to explain China's energy use changes between 1981 and 1987—the years for which we have input–output tables. We find that China's energy saving during this period came about primarily by changes in how to produce (production technology changes) rather than changes in what to consume (final demand shifts). The driving force of the energy intensity decline was energy efficiency improvements, which were multiplied across the entire economy through inter-industry input–output linkages.     

Deepwater energy industry impacts on economic growth and public service provision in Lafourche Parish,Louisiana

Oil and gas produced from active deepwater leases (over 1000 feet water depth) in the Gulf of Mexico as a percentage of total output increased from 27% in 1992 to 54% in 2005. This increase is requiring more land-based services. Port Fourchon's strategic location provides it with a competitive advantage as a supply base for a diverse set of deepwater oil and gas related activities, ranging from petroleum rig supply boats to the maintenance and repair of mobile drilling rigs. Further development of Port Fourchon as a supply base is expected to markedly impact Lafourche Parish. Community impact models (CIM) quantify the linkages among local economic activity and the demand for, and ability to support, local government services. A CIM developed for Louisiana, including an input–output module of the local economy, is used to evaluate the impact of the deepwater energy industry on the economy and government finances of Lafourche Parish. According to model results, the deepwater energy industry will continue to have a significant impact on that economy. By 2010, the industry was predicted to be directly and indirectly responsible for 2593 new jobs and $571 million in total output. Such activity should not strain the ability of local governments to deliver services.     

Major liquidity drain may fuel bond market vulnerabilities

• ? It is plausible that cross‐border bond purchases will average
  • ? It is plausible that cross‐border bond purchases will average $0.5trn in 2018 and 2019, a dramatic fall from $1.2trn in 2017, driven mainly by reductions in European and US purchases. This will exacerbate upward pressure on bond yields over and above those associated with traditional macroeconomic drivers. The US bond market (and the dollar) are particularly vulnerable .
  • ? This article is part of a long‐term research project, whose intricate analysis of global fixed income flows has revealed strong implications for global bond valuations that could be inconsistent with consensus expectations for the global economy.
  • ? The termination of net purchases under the ECB's asset purchase programme (APP) will have important implications for global bond markets, which may be larger than those associated with the end of the Fed's QE programme. The unwind will prompt a reversal in European investors' aggressive rotation of portfolios from domestic to foreign fixed income securities and other asset classes. This could reduce cross‐border purchases by European investors by €200bn per year.
  • ? US investors are also expected to buy fewer foreign bonds as they are likely to have to absorb an increase in the supply of domestic bonds because of (i) a larger fiscal deficit; (ii) the Fed's portfolio unwinding; (iii) corporate sector liquidation of holdings abroad; and (iv) greater financial sector issuance tied to household re‐leveraging.
  • ? Emerging markets' (EM) purchases of foreign bonds are expected to continue to be subdued in the short‐term after recent steep declines. Our baseline view is that, on the back of the return of capital flows into emerging markets, EM purchases of advanced market securities will bounce back but not by enough to offset the retrenchment of American and European investors. However, the risks to the downside are considerable given shifting global policy developments.