Foreign Investment and Wages: A Crowding-Out Effect in Mexico

• Enrique L. Kato Vidal ^[1]
  1. [1] Universidad Autónoma de Querétaro

     Universidad Autónoma de Querétaro

     México

     
• Localización: Latin American Journal of Economics: formerly Cuadernos de Economía, ISSN-e 0719-0433, Vol. 50, Nº. 2, 2013, págs. 209-231
• Idioma: inglés
• Enlaces
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• Resumen

  • The purpose of this article is to determine the impact of foreign direct investment (FDI) on a country’s overall economy rather than simply the sectors receiving such investment. The strategy consisted of adopting a crowding-in/crowding-out approach to Mexico’s total capital volume in the 1993-2010 period. The substitutability of foreign and local capital implies a lower-than-expected economic dynamism. Using a dynamic panel analysis, a negative relationship was found between FDI and the general wage. Throughout the analysis, firm size stands out as a key variable in explaining the impact of FDI.