Appendix 1: Data
All trade data are taken from UNCOMTRADE database, which reports bilateral trade flows at detailed product level. The observations are annual and in U.S. dollar terms. 4-digit SITC product data are used for all calculations that require product-level details.
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Prepared by Kai Guo (SPR).
See Hanson (2010) for more discussions on potential factors behind Mexico’s growth performance.
The Asia supply chain is comprised of China, Hong Kong SAR, Korea, Singapore, Taiwan Province of China, Indonesia, Malaysia, the Philippines, Thailand, and Vietnam.
One important caveat is that TFP may be endogenouswhereby the derived low TFP growth in Mexico could be a result of competition from China.
Hanson and Robertson (2010) also tried to derive the impact from China’s competition by estimating a gravity equation. Despite the different methodology, the magnitude of the China effect on Mexico’s manufacturing exports is estimated to be between 0.2 to 3.4 percent during 1995-2005, similar to this paper’s finding.
For example, the income effect due to terms of trade changes, which could be a result of competition from China, is not captured by the analysis. Such effect could be quite important.
It should be noted that the quality of wage data in China is known to be of low quality. Therefore, this paper refrains from using wage data and ULC-based real exchange rate to conduct regression analysis.