KCG Seminar by Henning Mühlen on the Role of FDI for Structural Transformation in Mexico

Foreign direct investment (FDI) inflows are widely perceived to be able to support economic growth in developing host countries. Multinational enterprises (MNEs) investing on site bring in not only financial resources that are otherwise lacking in these countries. They also bring in more advanced know-how and technologies that are expected to be advantageous for these host countries’ economic development as well. Despite a generally positive impact of FDI on local economic development, it would be unrealistic to assume that each worker, each sector and each region of the host countries would benefit equally from such generally positive FDI impact.

Foreign investors may focus on some selected cities and regions for investment due to, for example, their relatively better developed infrastructure for transportation and communication. Their investment may also focus on some selected sectors where the host countries may have stronger comparative advantages. The unequal distribution of FDI across regions and sectors and the unequal demand on differently skilled labour may thus pose adjustment challenges to local economic structures to different degrees.

Focusing on the case of Mexico, Dr. Henning Mühlen (University of Hohenheim) will give a presentation on whether and how FDI may have different impacts on the economics structure across the country on July 4, 2018 at the Kiel Institute for the World Economy. The presentation is based on a state-level analysis of a dataset covering a recent period from 2006 to 2016. The key variable for the economic structural change in Mexico is calculated based on the reallocation of labour between sectors. In addition to a general analysis, in which they find a positive impact of FDI on structural change in Mexico, the authors also carry out an analysis considering different skill levels of workers. Their analysis results lead them to conclude that “it is precisely the reallocation of medium- and low-skilled labour that is driven by FDI”.

Date: Wednesday, July 4, 2018, 11.00-12.00

Venue: Common Room (A-111), Kiel Institute for the World Economy (Kiellinie 66, 24105 Kiel)

The full abstract can be found here.