Input-Output Linkages of Japanese Affiliates in Mexico within NAFTA

This study empirically investigates input-output linkages of Japanese affiliates in Mexico between the United States, Canada, Mexico, and Japan. Constructing a panel dataset at the affiliate level between 1995 and 2012, this study identifies significant linkages for international input-output flows between these countries. It finds that Japanese affiliates' imports of inputs from the United States and Canada significantly increase their exports of output to those countries. On the other hand, there is little evidence that their purchases of inputs in Mexico increase their exports to the United States and Canada. In turn, local sales of Japanese affiliates in Mexico are sustained by diversified intermediate inputs sourced from the United States, Canada, Mexico, and Japan.