Productivity Puzzle of the Mexican Economy, 1994-2023

Mexico’s productivity landscape has faced significant challenges over the past few decades. This study aims to explain the productivity puzzle in the Mexican economy from 1994 to 2023 by utilising the labour productivity accounting framework to estimate an econometric model that measures Mexico’s total factor productivity (TFP); furthermore, it identifies the factors that previously contributed to growth but are now weakening. The empirical results reveal that the decreasing trend of TFP is because of capital saturation rather than the labour factor. Additionally, it shows that both productivity per worker and per hour worked exhibit a negative but significant relationship with TFP. Therefore, strategic investments in education, training, and infrastructure are crucial for overcoming productivity challenges and leveraging opportunities like nearshoring for sustainable growth.