Trade Protection and Capital Imports in the Mexican Manufacturing Sector
41 Pages Posted: 13 Dec 2005 Last revised: 5 Mar 2008
Abstract
Several studies have investigated the link between trade protection and productivity in developing economies. Others have looked into the relationship between technology imports and in-house technology production. This paper fills a void in the literature by estimating the effect of trade protection on purchases of foreign capital goods for a panel of Mexican manufacturing plants. Tariffs on output lower the probability a plant will import capital goods, while both output and input tariffs lead to smaller quantities of capital imports. Capital imports are also associated with higher productivity. Thus, trade barriers may indirectly lower productivity by inhibiting the importation of foreign technologies through capital goods.
Keywords: capital imports, Latin America, Mexico, trade protection
JEL Classification: F14, L60, O14, O33
Suggested Citation: Suggested Citation