Abstract

ANGELES CASTRO, Gerardo; SALAZAR RIVERA, Mayra Paulina  and  SANDOVAL CONTRERAS, Luis. Fiscal Federalisation and its Effect on Growth and Income Distribution: Evidence from Mexico. Gest. polít. pública [online]. 2019, vol.28, n.1, pp.107-139. ISSN 1405-1079.  https://doi.org/10.29265/gypp.v28i1.543.

Every year the federal government in Mexico allocates resources to entities and municipalities in a progressive way through the item 33, which is oriented mainly to social expenditure. This resource is aimed at decentralising responsibilities, providing regular revenue to local entities and distributing income across regions. Through panel data and quantile regressions, and using a data set across 32 entities over a 18 years period (1998-2015), we find that over the longer run the item 33 has a positive effect on economic growth and is associated to a reduction of the income gap among states, especially in low income entities, but the effect is not enough to cause conditional convergence. There is some evidence indicating that decentralized public spending can be associated to more inequality within states in the longer run, but this result does not hold in the more unequal states, where the item 33 does not seem to cause any effect.

Keywords : Mexico; item 33; fiscal federalism; econometric analysis; income distribution; economic growth.