Regional Integration and Productivity: The Experiences of Brazil and Mexico

Jul 2003
This paper discusses the impacts of integration on productivity, specifically within regional agreements. The paper focuses on the economies of Brazil and Mexico and on their performance in the manufacturing sector. The authors estimate firm-level productivity and test its casual links with trade and foreign direct investment (FDI) variables. The results suggest strong trade related gains, with import discipline emerging as the dominant effect. The results on learning-by-exporting were mixed, with gains restricted to Brazil's regional and worldwide exports. On FDI, foreign firms appear to have had a positive impact on their buyers and suppliers in Mexico, but in Brazil, the overall impact was statistically insignificant on productivity levels and negative on productivity growth.