Productivity in Mexico: Trends, Drivers, and Institutional Framework

Over the past three decades, economic growth in Mexico has been lackluster, with declining multifactor productivity as the main culprit. Mexico’s growth malaise stems not only from existing barriers to the productivity of labour and capital, but also, to a large extent, from a misallocation of both inputs. This is epitomized by a large informal labour market and by a financially-underserved private sector. Factor misallocation has generated large productivity gaps between sectors and regions. In particular, a process of structural transformation that mobilizes resources toward high-productivity activities has unfolded slowly. To spur economic growth, the Mexican Government has placed productivity at the center of the policy agenda, not only by enacting a wide array of productivity-enhancing structural reforms, but also by establishing an institutional framework conducive to the design and implementation of public policies that address existing bottlenecks. ONE OF THE CURRENT conundrums in