Political framework and financial dependency of the Mexican states Entorno político y dependencia financiera de los estados mexicanos uri icon


  • Previous studies on financial dependence of Mexican states have concentrated on the effects of the National System of Fiscal Coordination, established in 1980, and regional characteristics of the states. In this paper we analyze the effects of the political framework over states' financial dependence on revenue sharing transfers. The variables comprising the political framework are constructed with the political affiliation of the state governor, the composition of the local congresses, the political affiliation of the Mexican president, and the electoral cycles. In order to study the influence of such framework, we propose and estimate empirical fixed effects models with the panel data approach. We use a data base consisting of a pooling of cross sectional (31 states) and annual time series (1998-2006). The results show evidence that the impact of confluence and political cycles on financial dependence is different, depending on political affiliation of the governor. It is in that sense that not only institutional, economic, fiscal, and regional factors influence states' financial dependence: the political framework is also important.

Publication date

  • January 1, 2013