| Abstract: | Utilizing data from quinquennial industrial censuses for the period 1960-1975, this study examines economies of scale in a number of Mexico's manufacturing industries. A cross-sectional approach is used to estimate production functions by industry for each of four industrial censuses. In contrast to findings of relatively constant returns to scale for the United States, the Mexican data reveal substantial economies of scale at both the beginning and the end of the study period, suggesting that further opportunities for reduction in long-run costs exist. The resultant policy implications are that measures which promote larger scale manufacturing (incentives for expanded domestic production, export promotion, and selected tariff preferences) will speed up both short-term recovery and long-term growth of the Mexican economy. It is desirable, however, that these policies be harmonized with other designed to reduce the environmental contamination and congestion that has accompanied Mexico's industrial development. |
