The (un)lucky neighbour: Differences in export performance across Mexico's states

This paper studies the reasons behind the export performance of different Mexican states from 1994 to 2002. Mexican exports are divided into two components: (1) foreign market potential; and (2) supply capacity. Results suggest that states that experience an increase in supply capacity are, in most cases, also those with better export expansion. However, results suggest that in most cases, export growth is due mainly to an increase in US demand rather than to an improvement in the states' competitiveness to supply this demand. When looking to the determinants of supply capacity improvements, results suggest the presence of positive neighbouring effects.