Institutional context for local economic development in Mexico, 1990-2015. A need for change?

People?s quality of life in specific places is affected by their territories? characteristics and local agents? actions and interactions, as well as their responses to external influences. Formal and informal institutions contribute to shape those actions, interactions and responses. Following North (1990) and Storper (1995), the economic performance of places is influenced by their particular institutional setting; and, therefore, by the way a particular society is organised. Hence, the political and social dimensions acquire special importance. Relating those ideas to the bottom-up approach towards development, and its positive effect on the development of Mexican municipalities found by Rodriguez-Pose and Palavicini-Corona (2013), it is relevant and interesting to analyse if, in the Mexican context, formal and informal institutions have facilitated or not economic development at the local level. As the basis of the development from below approach stems from its proximity to local characteristics and agents, the lowest level of government jurisdiction is the focus of analysis. Two municipalities located in a Mexican state with a long presence of institutions and resulting mechanisms closer to citizens were selected in order to further assess the role of institutions. The hypothesis tested is that the general formal institutional context in Mexico has a relevant propitious role in LED. In relation to the case studies, the hypothesis is that a more favourable effect in one of the studied municipalities than the other is due to differences in the functioning of their formal institutions and the particularities of their informal ones. It was found that the national and sub-national formal institutional setting has allowed and, at some degree, stimulated municipalities to plan and execute local economic development actions during the period of analysis (1990-2015). However, abiding to the law and enforcing it are the main aspects to be addressed in this Latin American country. As far as the case studies are concerned, significant differences in their informal institutions affected the presence of the LED approach and their development performance from 1990 to 2010. Finally, in light of the concrete findings, I present a set of proposals to both introduce some adjustments to the legal framework and make the best of current formal and informal institutions prevailing in Mexico, in general, and the studied municipalities, in particular.