Title page

Contents

Abstract 4

Résumé 4

Introduction 6

Recent developments in Mexico's participation in global value chains 6

GVCs Data 7

Main features of Mexico's GVC participation and recent trends 8

Drivers of forward participation in GVCs 12

Literature review 13

Methodology 14

Results 15

Conclusions 20

References 21

Annex A 24

Table 1. Determinants of GVC participation: a gravity estimation 16

Table 2. Determinants of forward GVC participation 18

Table 3. Determinants of GVCs participation: interactions with country-specific variables 19

Figure 1. Mexico is benefiting from ongoing changes in global value chains 7

Figure 2. Mexican total participation in GVC is high and increasing 8

Figure 3. Mexican backward participation in GVCs is high and increasing 9

Figure 4. Forward participation in global value chain remains low 9

Figure 5. Mexico's GVC participation is concentrated in manufacturing 10

Figure 6. Recent changes in services forward participation tend to be small 10

Figure 7. The US import share moves from China to alternative source countries 11

Figure 8. Mexico's GVCs linkages with China have gradually increased 11

Figure 9. Mexico's GVC participation is more skewed towards North America 12

Figure 10. The dependence of Mexico's exports on inputs from China and the United States has increased 12

Figure 11. Forward participation is positively related to productivity growth 13

Annex Tables

Table A A.1. Descriptive statistics of main variables 24

Table A A.2. Robustness analysis with TIVA dataset 25

Table A A.3. Robustness analysis with TIVA dataset 26

Table A A.4. Robustness analysis - Gravity estimations with interactions between country-specific variables and international border 27

Annex Figures

Figure A A.1. Breakdown of exports in terms of value-added 24

Figure A A.2. Mexico's gap to the predicted GVC forward participation shows untapped potential 28