The role of local and regional governments in investment growth and productivity enhancement in Mexico

H Social Sciences (General);HJ Public Finance;JS Local government Municipal government

Ibarra Armenta, Cristina Isabel ; Azemar, Celine

University:University of Glasgow

Department:Adam Smith Business School

关键词: Regional competition, LED, private investment;   

Others  :  http://theses.gla.ac.uk/6972/7/2015IbarraArmentaphd.pdf

来源: University of Glasgow

【 摘 要 】

This thesis examines the influence of local and regional governments in investment growth and productivity in Mexico. A combination of quantitative and qualitative analysis is used with the aim of assessing their influence and tools. Mexican municipalities and states have gained major participation in policy making, investment fostering and infrastructure building. The decentralised resources to meet these goals have increased considerably; as a consequence, it becomes imperative to measure the actual effects of such resources as well as to identify the opportunity areas to develop. The first part of the empirical analysis, attempts to measure the influence of local governments’ expenditures on private investment growth, as well as to identify the most important investment drivers. Likewise, given the increasing foreign investments landing in Mexico, there is a potential regional competition between cities, this is also evaluated. A panel data analysis consistent with cross section dependence is carried out for 63 Metropolitan Areas (MA)/cities for the period 1993-2008. The econometric analysis shows that, municipal governments’ expenditures have had a substantial effect on private capital. In addition, competition strategies matters. More importantly, public infrastructure stock is revealed as a central determinant for investment, especially for manufacturing firms.The second empirical chapter evaluates whether municipal and state expenditures in economic policies have boosted productivity of firms. Firms and regional features are also included in the estimation models. Panel data analysis consistent to cross section dependence is used, for 63 MA/cities and 29 states. The results showed that the policies implemented in municipalities have had little or even negative effects over firms’ productivity. Meanwhile, the policies implemented by states have had larger influence on productivity increases. In order to dig deeper into the role of local and regional governments in economic policies, two case studies –Hermosillo and Mexicali- are presented in the last part. Empirical models cannot tell about the local processes, as the data used is only expenditures. The fieldwork undertaken helped to identify the most significant policies followed in each city, as well as the leadership and organisation of stakeholders. The main finding suggests that local participation and overcoming political cycle is essential for the long-term success; and easing doing business for firms, rather than incentives, is more effective to spur private investment.