The role of FDI in structural change: Evidence from Mexico

Abstract

Foreign direct investment (FDI) flows to Mexico are substantial and play an important role in the Mexican economy since the mid‐1990s. These investments reflect the activities of multinational firms that shape to some extent the economic landscape and sectoral structure in this host country. We illustrate that there is considerable variation in the amounts of FDI and structural change within the country and across time. Based on this, the paper's main purpose is to analyse whether there is a significant impact of FDI on structural change. We conduct an empirical analysis covering the period 2006–16. We use the fixed‐effects estimator where the unit of observation is a Mexican state for which we calculate structural change from the reallocation of labour between sectors. The results suggest that (if any) there is a positive effect from FDI on growth‐enhancing structural change. This effect depends critically on the lag structure of FDI. Moreover, there is some evidence that the positive effect (a) arises from FDI flows in the industry sector and (b) is present for medium and low‐skilled labour reallocation.

Multinational enterprises and structural transformation in emerging and developing countries: A survey of the literature

“…A large number of studies found that the presence of MNCs contributed to TFP growth via spillovers from both horizontal and vertical linkages with MNCs (Ramirez 2006;Suyanto, Salim and Bloch;Fernandes and Paunov, 2012;Anwar and Nguyen, 2014) across various levels of aggregation (Liu and Wang, 2003;Peluffo, 2015;Herzer, 2013Herzer, , 2017Mühlen and Escobar, 2019;). These impacts manifested by raising the industrial competitiveness of manufacturing, by contributing to labour-movement into productive manufacturing and services or simply due to the higher productivity of foreign firms (Fan and Hu, 2007;Lin, Lee and Yang, 2011;Fan, Hu and Kwan, 2019).…”

“…While the growth benefits of FDI have been studied extensively, its impact on structural transformation has largely been ignored in the literature (Mühlen and Escobar, 2019).…”

“…Cole and Elliot, 2017;Erdogan, 2014). Little systematic survey of the literature examines what we have learned about the impact of MNEs on structural change in the developing countries, partially because structural change is systematically overlooked in the literature (Mühlen and Escobar, 2019). This paper aims to fill in the gap.…”

Effet de l'émigration sur la transformation structurelle de la Communauté Économique des États de l'Afrique de l'Ouest

“…Sur le plan empirique, étudiant les effets des IDE sur la transformation structurelle au Mexique, Mühlen et Escobar (2020) ont introduit les migrations nationales nettes et les migrations internationales nettes dans un modèle pour contrôler les potentiels effets des mouvements nationaux et internationaux des travailleurs sur la réallocation de la main-d ' oeuvre. Les auteurs ont montré que les migrations nationales nettes contribuent négativement à la réallocation de la main-d ' oeuvre peu qualifiée entre les secteurs d ' activités au Mexique.…”

Nonlinear System Simulation and Forecasting of Regional Technology Innovation Using System Dynamics Method

“…There are a large number of literatures on international technology spillovers, and the perspectives and indicators are quite different. Some studies found that the effect of FDI technology spillover was not always significant, and the impacts are contingent on regional conditions, yet some found that FDI did not improve the local innovation ability, but had an inhibiting effect [9][10][11][12][13][14][15][16]. The other important issue is the relationship between IPR protection and RTI, which is how IPR protection influence RTI.…”