Economic Impact of the Maquiladora Industry in Mexico PDF Download

Author: Ramon G. Guajardo-Quiroga
Publisher:
ISBN:
Category : Industries
Languages : en
Pages : 200

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Book Description
The maquiladora program, composed of assembly plants located in Mexico, is the result of special provisions in both Mexican and American law. This program plays a central role in a new development program, chosen by the Mexican government, based on an outward-oriented development strategy and liberalization of the economy. The broad objectives of this program are to provide sources of employment (particularly in the border zone), to generate foreign exchange, and to create linkages between the maquiladora industry and the rest of the Mexican economy. Maquiladoras have been the center of a great deal of controversy in both countries since their 1965 inception. This controversy is centered mainly on benefits and costs on these countries. Particularly in the case of Mexico, there is no unique answer to the question: is the maquiladora program an adequate development strategy? This study focuses on an empirical assessment of the maquiladora program. Estimation of impacts on value of output, income, and employment within the Mexican economy is the major contribution of this research. General multipliers for the Mexican economy are estimated and the role of the Maquiladoras is discussed. Additionally, two simulations are addressed: (1) increased maquiladora purchases within Mexico and (2) earnings leakage to the United States. The methodology used to address the objectives of this study is an interindustry (input-output) model for the Mexican economy that accounted for the maquiladora linkages with the economy. An input-output model was developed for the Mexican economy. To account the economic impacts of the maquiladora program the model includes 29 sectors. Twelve of these represent the economic activity of maquiladora industries. The results indicate that maquiladoras have relatively low output multipliers. About 33% of their total value of output resulted from secondary effects with other linked sectors in the Mexican economy. Of this, indirect output generated through maquiladora's input purchases was 7% and induced output generated through maquiladora workers purchases of goods and services was 26%. Maquiladoras also have relatively low impacts on the Mexican households income because of relatively low domestic input purchases. On average, maquiladora sectors are more capital intensive than the rest of the Mexican economy. This and their weak backward linkages resulted in relatively low employment impacts. Maquiladora workers spendings impacts were about 2.6 times larger than maquiladora input purchases impacts ...