Determinants of Regional Growth by Manufacturing Sector in Mexico, 1998-2008

This article presents an empirical analysis aimed at identifying the determinants of regional growth in Mexico by manufacturing sector in the period 1988-2008. In the framework of agglomeration economies it argues that the main factor behind Mexico’s long-term regional industrial growth is Jacobs externalities (urbanization economies), and that wages are the main short-term factor behind this growth. There is heterogeneity in the determinants of regional growth according to technological intensity. Low-technology sectors appear to be more sensitive to initial wages and exhibit Jacobs externalities, while higher technology sectors show Porter economies (competition/specialization). Controlling for market conditions, agglomeration economies, and initial conditions, the south, the center and the Gulf of Mexico have a relative disadvantage for growth in medium-high-technology sectors. Moreover, only one out of the 58 Metropolitan Areas (MAs) studied shows a relative advantage for growth in this kind of industry. Relative advantage for low-technology sectors appears to be related to transportation and service infrastructure, while for high-technology sectors the main determinant is human capital.