Missing Links: Foreign Investment and Industrial Development in Costa Rica and Mexico

Paus, Eva; Gallagher, Kevin P.

doi:10.1007/s12116-007-9016-2

Cited by 88 publications

(68 citation statements)

References 21 publications

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“…Even when local firms are competitive in becoming MNCs suppliers, host country absorption capacity also depends on systemic learning infrastructure, institutions, and government policies (Paus and Gallagher, 2008).…”

Section: Consultationmentioning

confidence: 99%

Impact Evaluation of Innovation and Linkage Development Programs in Costa Rica: The Cases of Propyme and Cr Provee

Rodríguez-Álvarez

Monge-González²

2013

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. The opinions expressed in this publication are those of the authors and do not necessarily reflect the views of the Inter-American Development Bank, its Board of Directors, or the countries they represent. Terms of use: Documents inThe unauthorized commercial use of Bank documents is prohibited and may be punishable under the Bank's policies and/or applicable laws.Copyright © Inter-American Development Bank. This working paper may be reproduced for any non-commercial purpose. It may also be reproduced in any academic journal indexed by the American Economic Association's EconLit, with previous consent by the Inter-American Development Bank (IDB), provided that the IDB is credited and that the author(s) receive no income from the publication. This paper estimates the impact of two productive development programs (PDPs) in Costa Rica: PROPYME and CR Provee. The first seeks to increase the capacity of small and medium-sized firms (SMEs) to innovate, and the second aims to increase backward linkages between Costa Rican SMEs and multinational companies operating in the country. The impacts of each program were measured in terms of three result variables: real average wages, employment demand, and the probability of exporting. A combination of fixed effects and propensity score matching techniques was used in estimations to correct for any selection bias. The results show that both PROPYME and CR Provee have positive and significant impacts on SME performance. PROPYME's beneficiaries performed better than other firms in terms of labor demand and their probability of exporting, while firms treated by CR Provee showed higher average wages, labor demand, and chances of exporting than untreated firms. Firms treated simultaneously by both programs performed better in terms of average wages than those that were only treated by CR Provee. This result is of special interest to policymakers since it indicates the importance of bundling in the implementation of PDPs. The findings suggest that policies aimed at overcoming the weaknesses of these two programs are important for obtaining higher real wages, generating more employment, and increasing the probability of exporting by Costa Rican SMEs. Cataloging-in-PublicationJEL classifications: C21, C23, D04, D22, F23, J23, O12, O25, O31, O38, O54

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Section: Consultationmentioning

confidence: 99%

Impact Evaluation of Innovation and Linkage Development Programs in Costa Rica: The Cases of Propyme and Cr Provee

Rodríguez-Álvarez

Monge-González²

2013

SSRN Journal

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“…For instance, the absence of government financial support to CINDE´s activities exemplifies the lack of a development strategy in which the government assures that all the parts are complementing each other and moving forward in a coordinated way. Paus and Gallagher (2006) consider critical that CINDE is institutionally embedded in the context of a larger development strategy, with sufficient resources to comply its mission.…”

Section: Policy Outcomes and Conclusionmentioning

confidence: 99%

“…Even when local firms are competitive to become MNCs suppliers, host country absorption capability depends on the systemic learning infrastructure, institutions and government policies, as well (Paus and Gallagher, 2008 …”

Section: The Case For Policy Interventionmentioning

confidence: 99%

Productive Development Policies in Costa Rica: Market Failures, Government Failures, and Policy Outcomes

Monge-González¹,

Batiz

Rosales-Tijerino³

2010

SSRN Journal

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We analyze five Productive Development Policies (PDPs) implemented in Costa Rica to assess whether these policies are justifiable based on the existence of market failures. We find that PDPs are not addressing market failures optimally. Moreover, this study shows that government failures rather than market failures are the main source of PDPs justification. Even in presence of market failures, the instruments applied in the policy design are not necessarily the more efficient (according to economic theory), but the more politically feasible options (lower-political cost). Besides, lack of policy evaluation and monitoring prevents the required adjustments and corrections of such policies, according to changing circumstances. The case studies indicate that addressing the arguments for policy intervention and incorporating the results of the evaluation into policy design and reform are necessary conditions for success. The improvement of key areas (like infrastructure, technology, business regulations, and market distortions) to enhance competitiveness and create the required conditions for productivity growth is a policy objective still on process, with positive outcomes but important limitations so far. An umbrella approach in the case of those PDPs that reinforce and create feedbacks between each other is necessary for productivity growth. JEL Classification: D78, L52

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“…They argue that FDI exacerbates urban overcrowding due to the flight from rural areas and that even manufacturing FDI tends to be capital intensive (yielding limited employment). Paus and Gallagher (2008) show that FDI has been ineffective in promoting diversified industrialization in Mexico and Costa Rica (the two biggest recipients of FDI in Latin America). In their comparison of management practices in Japanese-owned consumer electronic maquilodoras and consumer electronic factories of Japan, Kenney, Goe, Contreras, Romero, and Bustos (1998) find limited spillover and learning for the host country.…”

Section: Work and Occupations 38(2)mentioning

confidence: 99%

Stagnating Industrial Employment in Latin America

Brady

Kaya

Gereffi

2011

Work and Occupations

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The industrialization of developing countries has fundamentally transformed work, employment, and labor for millions. Despite the industrialization of most of the developing world, we present evidence that Latin America has experienced stagnating industrial employment in the past few decades. Benefiting from recently available data on industrial employment as a percentage of total employment from 1980 through 2006, we analyze fixed-effects models for 20 Latin American countries. Specifically, we examine three theoretical explanations: productivity/comparative advantage, institutionalism, and dependency/world-systems. Our analyses demonstrate that the prevailing productivity/comparative advantage explanation has limited value. By contrast, we find supportive evidence for a combination of institutional and dependency/world-systems variables. In particular, the stagnating industrial employment share in Latin American countries has been driven by the negative effects of (in order of magnitude) the Mercosur trade agreement, mineral and ore exports (as a percentage of total exports), the duration of the current political regime, military spending (as a percentage of GDP), and inward foreign direct investment flows (as a percentage of GDP).

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Missing Links: Foreign Investment and Industrial Development in Costa Rica and Mexico

Cited by 88 publications

References 21 publications

Impact Evaluation of Innovation and Linkage Development Programs in Costa Rica: The Cases of Propyme and Cr Provee

Impact Evaluation of Innovation and Linkage Development Programs in Costa Rica: The Cases of Propyme and Cr Provee

Productive Development Policies in Costa Rica: Market Failures, Government Failures, and Policy Outcomes

Stagnating Industrial Employment in Latin America

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