Background and objective:

The Mexican automotive industry has become one of the strongest in the world, it generates significant contributions to the gross domestic product, and creates direct and indirect jobs, which promotes the entry of foreign direct investment. This article assesses the impact of the automotive industry on the Mexican economy.

Methodology:

The role of the automotive industry in the economic structure and its impact on investment flows are assessed through social accounting matrices. Under the proposed methodology, the classification of sectors and the impact and employment multipliers are obtained. Subsequently, an investment shock is introduced to analyze its effect on Mexico’s main economic indicators.

Empirical results:

The classification of sectors indicates that the automotive industry is not strongly linked to the national economy. The accounting multipliers show that the sector has a very weak sensitivity to changes in the rest of the accounts. Job multipliers classify it as an industry with a high labor productivity index. Finally, by simulating an investment shock for expansion, it is shown that the connection with the rest of the economy is stronger and generates greater capital flows with the rest of productive activities.

Limitations:

There is only complete and reliable data for social accounting matrices for 2012 in Mexico updated for the automotive sector.

Conclusions:

The automotive industry develops in isolation from the rest of the economic activity, however, empirical evidence shows that the impact that this sector has on the rest of the economy in the face of investment flows is stronger, and, in turn, those activities, which are keys within this expansion process, are identified.