Vol. 40 No. 1 (2025): 79-vol. 40, núm. 1, enero-junio 2025
Articles

Classical demands and informal supplies: Two key missing pieces of Mexico’s growth puzzle

pdf

PDF
  • Alain Ize
Alain Ize
Columbia University
DOI: https://doi.org/10.24201/ee.v40i1.e462

Published 2025-03-26

Keywords

  • growth,
  • import substituting industrialization,
  • global competitiveness,
  • captive demand,
  • informality

How to Cite

Ize, A. (2025). Classical demands and informal supplies: Two key missing pieces of Mexico’s growth puzzle. Estudios Económicos De El Colegio De México, 40(1), 1–60. https://doi.org/10.24201/ee.v40i1.e462

Metrics

Abstract

Why did Mexico's growth declined so much after the economy opened up?  And why so little growth despite so many exports? The narratives proposed to explain these puzzles miss two key pieces: classical demands and informal supplies. To grow faster, the country needs to focus not just on its export supply capacity but also on its capacity to grow domestically and enhance productivity by pulling in informal labor. In a globalized world, this requires developing export niches that generate sufficient domestic value and producing goods and services that are more innovative, more attractive and with more dynamic demands.  

pdf

PDF

Downloads

Download data is not yet available.

References

  1. Aghion, P., N. Bloom, R. Blundell, R. Griffith, and P. Howitt. 2005. Competition and innovation: An inverted-u relationship, The Quarterly Journal of Economics, 120(2): 701-728.
  2. Baer, W. 1972. Import substitution and industrialization in Latin America: Experiences and interpretations, Latin American Research Review, 7(1): 95-122.
  3. Bergoeing, R., P. Kehoe, T. Kehoe, and R. Soto. 2002. A decade lost and found: Mexico and Chile in the 1980s, Review of Economics and Dynamics, 5(1): 166-205.
  4. Bértola, L. and J.A. Ocampo. 2013. El Desarrollo Económico de América Latina Desde la Independencia, Mexico City, Fondo de Cultura Económica.
  5. Chiquiar D. and M. Ramos-Francia. 2009. Competitividad y crecimiento de la economía mexicana, Working Paper No. 2009-11, Banco de México.
  6. Cusolito, A.P. and W. Maloney. 2018. Productivity Revisited: Shifting Paradigms in Analysis and Policy, Washington DC, The World Bank.
  7. De la Torre, A. and A. Ize. 2019. Accounting for growth: An open macro perspective, in M. Shifter and B. Binetti (eds.), Unfulfilled Promises: Latin America Today, Washington DC, Inter-American Dialogue.
  8. De la Torre, A. and A. Ize. 2020. Accounting for Latin American growth: A trade and macro perspective, Economia, 21(1): 101-146.
  9. De la Torre, A. and A. Ize. 2022. Latin American growth: Looking through the demand glass, Policy Research Working Papers No. 10227, World Bank.
  10. GGDC. 2023a. Maddison Project Database 2023, https://dataverse.nl/dataset.xhtml?persistentId=doi:10.34894/INZBF2
  11. GGDC. 2023b. Penn World Table version 10.01, https://www.rug.nl/ggdc/productivity/pwt/?lang=en
  12. Goñi, E. and W. Maloney. 2017. Why don’t poor countries do R&D? Varying rates of factor returns across the development process, European Economic Review, 94: 126-147.
  13. Guerrero, I., L.F. Lopez-Calva, and M. Walton. 2006. The inequality trap and its link to low growth in Mexico, Working Paper No. 298, Stanford Center for International Development.
  14. Haltiwanger, J., R. Kulick, and C. Syverson. 2018. Misallocation measures: The distortions that ate the residual, NBER Working Paper No. 24199.
  15. Hanson, G. 2010. Why isn’t Mexico rich?, NBER Working Paper No. 16470.
  16. Hsieh, C. and P. Klenow. 2009. Misallocation and manufacturing TFP in China and India, The Quarterly Journal of Economics, 124(4): 1403–1448.
  17. Iacovone, L., R. Muñoz Moreno, E. Olaberria, and M. Pereira López. 2022. Productivity Growth in Mexico: Understanding Main Dynamics and Key Drivers, Washington DC, The World Bank.
  18. IMSS. 2023. Memoria estadística 2023, https://www.imss.gob.mx/conoce-al-imss/memoria-estadistica-2023
  19. INEGI. 2023. Archivo histórico, https://www.inegi.org.mx/app/archivohistorico/
  20. Irwin, D.A. 2020. The rise and fall of import substitution, NBER Working Paper No. 27919.
  21. Ize, A. 2019a. A Note on Mexico’s growth, Estudios Económicos, 34(1): 123-155.
  22. Ize, A. 2019b. El modesto crecimiento de México: una descomposición macroeconómica contable, Revista de Economía Mexicana, Anuario UNAM, 4: 53-94.
  23. Levy, S. 2008. Good Intentions, Bad Outcomes: Social Policy, Informality, and Economic Growth in Mexico, Washington DC, Brookings Institution Press.
  24. Levy, S. 2018. Under-Rewarded Efforts: The Elusive Quest for Prosperity in Mexico, Mexico, Inter-American Development Bank.
  25. Levy, S. and M. Walton. 2009. No Growth Without Equity? Inequality, Interests and Competition in Mexico, The World Bank and Palgrave McMillan.
  26. Londoño J.L. and M. Székely. 1997. Persistent poverty and excess inequality: Latin America, 1970-1995, Working Paper No. 357, Inter-American Development Bank.
  27. Lustig. N. 1998. Mexico: The Remaking of an Economy, Washington DC, The Brookings Institution.
  28. Maloney, W. F. and A. Zambrano. 2021. Learning to learn: Experimentation, entrepreneurial capital, and development, Policy Research Working Paper Series No. 9890, The World Bank.
  29. Martin, S. 2023. Estadísticas históricas, http://archivohistoriaeconomicamexico.com/
  30. McMillan, M. and D. Rodrik. 2011. Globalization, structural change and productivity growth, NBER Working Paper No. 17143.
  31. Restuccia, D. and R. Rogerson. 2017. The causes and costs of misallocations, Journal of Economic Literature, 31(3): 151–174
  32. Ros Bosch, J. 2015. ¿Como Salir de la Trampa del Lento Crecimiento y Alta Desigualdad?, El Colegio de México and Universidad Autónoma de México.
  33. Solow, R. 1957. Technical change and the aggregate production function, The Review of Economics and Statistics, 39(3): 312-320.
  34. Thirlwall, A.P. 2011. Balance of payments constrained growth models: History and overview, PSL Quarterly Review, 64(269): 307-351.
  35. US Census Bureau. 2023. Measuring America's People and Economy, https://www.census.gov/
  36. Vonyó, T. and A. Klein. 2017. Why did socialist economies fail? The role of factor inputs reconsidered, Working Paper No. 1708, School of Economics, University of Kent.
  37. World Bank. 2023a. World Development Indicators, https://databank.worldbank.org/source/world-development-indicators
  38. World Bank. 2023b. Global Financial Development Database, https://www.worldbank.org/en/publication/gfdr/data/global-financial-development-database