Identifying factors that explain the regional distribution patterns of Foreign Direct Investment (FDI) flows into an economy is no simple task, since they depend on a range of factors. In the case of Mexico, previous studies have documented the role of diverse characteristics in attracting FDI to the country's states. This study shows that economic complexity -a variable that indicates the productive capabilities or productive knowledge that exist in a given economy's economic structure -can explain the distribution of FDI among Mexican states. Similar to previous studies, we document the spillover effects of economic complexity, i.e., we show how states surrounded by states with a high level of economic complexity tend to receive more FDI. Moreover, we document how FDI flows to manufacturing industries are positively correlated with their level of economic complexity. This result, to the best of our knowledge, has not been documented before in this literature.
The opening up of the Mexican economy completely transformed the growth dynamics of the per capita Gross Domestic Product (GDP) of the country's various states, with a clear tendency towards growth being concentrated in specific regions. In this study, we quantify the indirect or spillover effect of economic complexity on growth based on the following two facts: i) economic complexity is an important factor in explaining GDP growth rates, and ii) there is a clear regional pattern in the states' economic complexity, i.e., the economic complexity variable shows a positive spatial autocorrelation. Our results provide two insights: first, that the estimated positive spillover effect of complexity on growth is not negligible, particularly for states in the north of the country, whose own economic complexity is as important as that of their neighbors. In contrast, the spillover effect in southern states is negative. Being located next to states with low levels of economic complexity has a significant negative externality that almost overrides the positive effect of a state's own level of complexity. Our findings lead us to conclude that spillover effects may *The views and conclusions contained in this article are those of the authors and do not necessarily reflect the point of view of Banco de México. The comments and remarks by three anonymous referees are greatly acknowledged. They have significantly enhanced this research work.
El presente texto aborda la evolución de la estructura económica manufacturera de los municipios del estado mexicano de Guanajuato empleando distintos métodos, pertenecientes a la literatura de geografía económica evolutiva, para i) describir la evolución de la especialización en las industrias manufactureras en el periodo 2003- 2018; ii) analizar las estrategias de diversificación de los seis municipios manufactureros más importantes con base en el nivel de complejidad económica de las nuevas ramas en las que se especializaron; iii) identificar las oportunidades de diversificación manufacturera futura de los seis municipios considerando su estructura económica más reciente. Se considera que el análisis puede ser relevante para el diseño de políticas públicas que puedan contribuir con el desarrollo económico e industrial de la entidad.
In this study, we calculate the productive capabilities of Mexico’s municipalities (i.e., their Economic Complexity Index, or ECI) and the productive capabilities required for their economic activities to be carried out (i.e., the ECI of their economic activities). We do this in order to determine whether or not the differences in the main municipal economic indicators (such as levels of wealth, economic growth rates, and salaries) are associated with differences in productive capabilities. Specifically, our results illustrate: i) a considerable heterogeneity, in terms of productive capabilities, across municipalities; ii) a positive relationship between the level of economic complexity of municipalities and their level of wealth and rate of economic growth, and iii) a positive relationship between the complexity of economic activities and the average salaries received by those employed in them. Furthermore, by finding that the majority of new firms in complex (non-complex) municipalities generally tend to engage in more sophisticated/higher-value-added (less sophisticated/lower-value-added) economic activities, we provide supporting evidence on the gradual accumulation of productive capabilities within municipalities to the literature on evolutionary economic geography. According to this literature, this is how economies generally develop, i.e., by gradually accumulating productive capabilities so as to become more diverse and be able to engage in more complex economic activities, allowing economies to grow and become wealthier.
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