Dr. Henning Mühlen, University of Hohenheim
Foreign direct investment (FDI) flows to Mexico are substantial and play an important role in the Mexican economy in the recent past. These investments demonstrate the activities of multinational firms which shape to some extent the economic landscape and structure in this host country. Yet, there is considerable variation in the amounts of FDI within the country. Hence, FDI is likely to have different impacts on the economics structure across Mexico. We provide descriptive figures of FDI and structural change indicators that highlight these issues. Based on these observations, the main aim of this paper is to analyze the impact of FDI on structural transformation. We conduct an empirical analysis at the regional level covering the period 2006-2016. The unit of observation is a Mexican state for which we calculate structural change from the reallocation of labor between sectors. The results suggest that there is a positive effect from FDI. This effect depends critically on the lag structure of FDI. Moreover, there is evidence that the positive effect arises from FDI flows in the industry sector.
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