Total factor productivity in manufacturing in the central region of Mexico: 1993-2018

In Mexico there is a very heterogeneous panorama on productivity, which is reflected in one of the fundamental sectors of the economy, the manufacturing industry. Since, world-class companies coexist with a cluster of companies whose economies of scale present low productivity due to technological backwardness, which translates into a low growth rate of companies. This paper aims to identify the productive dynamics of the sources of growth in the central region in the manufacturing industry. The methodology used is based on a couple of instruments: The Solow Residual with an empirical model based on a Cobb-Douglas type function to determine the evolution of total factor productivity (TFP). Additionally, the sunrise/sunset diagrams are used to establish the contributions of each entity to the region's TFP. The results confirm growth of 0.12 in the TFP for the region throughout the period, the deconcentration of manufacturing activities in both the central region and Mexico City; so, it is concluded they ceased to be the largest nucleus industry of the country, which has implied a lower dynamism of the TFP at the national level and a decrease in the contribution of manufactures to the economic development of the country. Likewise, the performance presented by the entities of the central region registers inefficient levels; Mexico City being the great "loser," as it has decreased in TFP, and with this, has reduced its contribution and importance in Mexican manufacturing drastically.