Abstract
We analyze the main characteristics that help explain the regional distribution of manufacturing foreign direct investment (FDI) in Mexico. Our main findings indicate the presence of a positive spatial relationship among states’ FDI which, combined with the zero effect found for the market potential variable, points to the presence of complex vertical FDI. We consider that this is consistent with the fact that just over a third of manufacturing FDI in the country is located in the automotive sector. Moreover, we find positive direct and indirect effects of human capital, agglomeration, and states’ fiscal margins. Based on the results of this research, attraction of FDI should be considered in a regional context and not only from a local perspective.
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