Structural Integration, Exports and Growth in Mexico: An Input--Output Approach

In Input--Output analysis, the term ‘important coefficients’ refers to direct intersectoral connections, behind which lie substantial indirect connections, such that a small change in one of those coefficients would have a large impact on the output of a related sector. This paper employs important coefficients as indicators of the level of integration between the industries in an economic structure. An economic structure is defined as a set of interdependent sectors linked by a set of intermediate demand flows. Such flows define the character of the aforementioned structure. It is hypothesized that changes in the level of integration affect the ability an economy has to provide welfare opportunities to its population. The paper also shows that a reduction in the degree of integration of an economy weakens its ability to achieve steady growth, because of the loss of the propagating effects of an expanding demand, even if exports expand at high rates. This might explain the disappointing performance of the Mexican economy in regard to these issues even after structural reforms have been adopted and exports growth has become a central component of the development strategy.