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Institutions and development in Mexico. Are formal economic reforms enough?

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  • Manuel Palma-Rangel

    () (Instituto Federal Electoral)

Abstract

This paper examines whether the current political arrangements framing the Mexican politics help in consolidating and advancing those economic reforms that have been implemented in Mexico since the 1982 severe economic crises. I will argue that these arrangements create impediments to the co-ordination required to sustain and advance those policy changes that are needed under the new economic model. Formal and informal institutional environments that do not provide for the adequate enforcement of political exchanges also generate high transaction costs. Politicians will have to design complex mechanisms to protect their rent allocation. Many political transactions will not be implemented, and those that may be so will tend to generate relatively inefficient public policies. The capability of the political system to enforce the new economic rules as well as property and other legal rights is also weak. As these factors play a key role for the allocative efficiency of markets and, consequently, for growth and development, the paper concludes that formal macroeconomic and structural reforms in economic sectors may not be enough.

Suggested Citation

  • Manuel Palma-Rangel, 2006. "Institutions and development in Mexico. Are formal economic reforms enough?," Revista de Analisis Economico – Economic Analysis Review, Ilades-Georgetown University, Universidad Alberto Hurtado/School of Economics and Bussines, vol. 21(2), pages 83-103, December.
  • Handle: RePEc:ila:anaeco:v:21:y:2006:i:2:p:83-103
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    References listed on IDEAS

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    1. Kaufmann, Daniel & Kraay, Aart & Zoido-Lobaton, Pablo, 1999. "Governance matters," Policy Research Working Paper Series 2196, The World Bank.
    2. Philippe Aghion & Alberto Alesina & Francesco Trebbi, 2004. "Endogenous Political Institutions," The Quarterly Journal of Economics, Oxford University Press, vol. 119(2), pages 565-611.
    3. Pablo T. Spiller, 2003. "The Institutional Foundations of Public Policy: A Transactions Approach with Application to Argentina," Journal of Law, Economics, and Organization, Oxford University Press, vol. 19(2), pages 281-306, October.
    4. Keefer, Philip & Knack, Stephen, 2002. "Polarization, Politics and Property Rights: Links between Inequality and Growth," Public Choice, Springer, vol. 111(1-2), pages 127-154, March.
    5. Keefer, Philip, 2004. "What does political economy tell us about economic development - and vice versa?," Policy Research Working Paper Series 3250, The World Bank.
    6. Kaufmann, Daniel & Kraay, Aart & Zoido-Lobaton, Pablo, 1999. "Aggregating governance indicators," Policy Research Working Paper Series 2195, The World Bank.
    7. Fabrice Lehoucq & Gabriel Negretto & Francisco Aparicio & Benito Nacif & Allyson Benton, 2005. "Political Institutions, Policymaking Processes, and Policy Outcomes in Mexico," Research Department Publications 3204, Inter-American Development Bank, Research Department.
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    1. repec:eee:rujoec:v:2:y:2016:i:4:p:349-374 is not listed on IDEAS

    More about this item

    Keywords

    Legislative Coalitions; Property Rights; Institutions; Economic Reform; Presidential System; Mexican Politics.;

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • P16 - Economic Systems - - Capitalist Systems - - - Political Economy of Capitalism

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