In fact, positive contributions to the expansion of per capita income have come from both labor and capital. Favorable demographics largely explain the contribution of labor to per capita income growth.2 By far, the most serious problem has been one of stagnant total factor productivity (TFP). A comparison with China is rather telling.
While TFP in Mexico has remained basically flat, Chinese TFP has increased dramatically.3 The Mexican productivity conundrum is not easily explained.