NAFTA¡¯S IMPACT ON THE MEXICAN AUTOMOTIVE SECTOR

Abstract

The findings discussed here are the outcome of continuing research on the Mexican automotive industry and include data for several years during which the NAFTA was in effect. Key results include strong evidence of constant returns to scale in both the automotive industry as a whole as well as the vehicle assembly industry and a finding that the period after NAFTA was implemented has been associated with lower production costs. In addition, these data support the conclusion that capital, labor, and foreign intermediate goods are all substitutes for one another, as are capital and domestic intermediate goods, but that labor and domestic intermediate goods are complements. While evidence was found to suggest some increased responsiveness in domestic markets to both foreign and domestic input prices, other results give reason for concern about continuing market impediments in Mexico.Mexico, Automotive Industry, NAFTA