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Fiscal Policies and Subnational Economic Growth in Mexico

Author

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  • Arwiphawee Srithongrung

    (Hugo Wall School of Public Affairs Wichita State University, USA)

  • Isaac S nchez-Ju rez

    (Department of Social Sciences Universidad Aut noma de Ciudad Ju rez, Mexico)

Abstract

This study investigates the effects of taxes and public investment on economic growth of Mexican states. The subnational government finance data were drawn from 32 states during the period of 1993 to 2011. Correcting for long-term trends and isolating cointegration effects between economic growth and public finance, the empirical results indicate that taxes have negative effect on growth and the effect can be seen in both transitory and permanent manners. As predicted by growth theory, the effects of public investment on subnational growth are statistically significant and positive in both short and long-runs. On the other hand, we find that educational accomplishment negatively relates to growth. Foreign direct investment does not have any significant effect on subnational economic growth. In general, the results imply that an appropriate fiscal policy (equilibrium between public investment and taxes) is required to boost economic growth in this country.

Suggested Citation

  • Arwiphawee Srithongrung & Isaac S nchez-Ju rez, 2015. "Fiscal Policies and Subnational Economic Growth in Mexico," International Journal of Economics and Financial Issues, Econjournals, vol. 5(1), pages 11-22.
    • Handle: RePEc:eco:journ1:2015-01-02
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    5. Zhaopeng Chu & Changxin Liu & Gang Li & Kaixuan Guan, 2018. "Sustainable Development of the Economic Circle around Beijing: A View of Regional Economic Disparity," Sustainability, MDPI, vol. 10(10), pages 1-17, October.

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    More about this item

    Keywords

    Mexico; economic growth; taxes; public investment; states.;
    All these keywords.

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O23 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Fiscal and Monetary Policy in Development
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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