Profit Margins in Mexico's Manufacturing Industry: An Econometric Study

Posted: 22 Mar 2001

See all articles by Julio Lopez Gallardo

Julio Lopez Gallardo

National Autonomous University of Mexico (UNAM) - Instituto de Investigaciones Económicas

Martin Puchet Anyul

National Autonomous University of Mexico (UNAM) - Instituto de Investigaciones Económicas

Joel Sanchez Hernandez

National Autonomous University of Mexico (UNAM) - Instituto de Investigaciones Económicas

Abstract

Prices, wages and profit margins in Mexico have varied considerably. The purpose of this study is to analyze the evolution of profit margins in the Mexican manufacturing industry during the last two decades and to provide an explanation for the changes. The econometric study shows that surges in the exchange rate provoke increases in prices, both because imported input costs rise and because pressures from foreign competition are relaxed when domestic prices of imported goods rise. A second factor influencing margins is trade openness. Third, the level of profit margins also depends positively on the level of labor costs. An increase in labor costs tends to be passed along in a more than proportional manner to prices. Finally, an increase in interest rates seems to stimulate increases in profit margins, at least in some manufacturing divisions.

JEL Classification: L60

Suggested Citation

Lopez Gallardo, Julio and Puchet Anyul, Martin and Sanchez Hernandez, Joel, Profit Margins in Mexico's Manufacturing Industry: An Econometric Study. Available at SSRN: https://ssrn.com/abstract=231554

Julio Lopez Gallardo

National Autonomous University of Mexico (UNAM) - Instituto de Investigaciones Económicas ( email )

Av. Universidad 3000
Edif. de las Oficinas Administrativas 2
04510 Ciudad Universitaria
Mexico
55 77 62 03 (Phone)
57 50 10 95 (Fax)

Martin Puchet Anyul (Contact Author)

National Autonomous University of Mexico (UNAM) - Instituto de Investigaciones Económicas ( email )

Av. Universidad 3000
Edif. de las Oficinas Administrativas 2
04510 Ciudad Universitaria
Mexico

Joel Sanchez Hernandez

National Autonomous University of Mexico (UNAM) - Instituto de Investigaciones Económicas

Av. Universidad 3000
Edif. de las Oficinas Administrativas 2
04510 Ciudad Universitaria
Mexico

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