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Government Spending, Taxation, and Oil Revenues in Mexico

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  • José A. Tijerina–Guajardo
  • José A. Pagán

Abstract

The paper analyzes the intertemporal relationship between oil duties, taxes, government spending, and GDP in Mexico during the 1981–98 period. The results from estimating a VAR model, impulse response functions, and variance decompositions on the quarterly series of taxes, government spending, oil duties, and GDP suggest that there seems to be a substitution effect between oil duties and tax revenues, and that tax revenues are not able to absorb temporary decreases in oil duties. Also, increases in tax revenue might lead to increasing government spending, but short–run increases in government spending are not likely to lead to political pressure to reduce the expected budget deficit via increased taxation and/or oil revenues. Lastly, GDP is not stimulated in the short–run by temporary increases in government spending and, thus, stabilization measures adopted in recent years to reduce the size of the government are not likely to significantly undermine GDP growth.

Suggested Citation

  • José A. Tijerina–Guajardo & José A. Pagán, 2003. "Government Spending, Taxation, and Oil Revenues in Mexico," Review of Development Economics, Wiley Blackwell, vol. 7(1), pages 152-164, February.
    • Handle: RePEc:bla:rdevec:v:7:y:2003:i:1:p:152-164
    DOI: 10.1111/1467-9361.00182
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    Cited by:

    1. Yaya Keho, 2010. "Spending Cuts or Tax Adjustments: How Can UEMOA Countries Control Their Budget Deficits?," International Journal of Business and Economics, School of Management Development, Feng Chia University, Taichung, Taiwan, vol. 9(3), pages 233-252, December.
    2. Jaime Bonet & Karelys Guzman & Joaquin Urrego & Juan Villa, 2015. "Effects of the General System of Royalties on municipal fiscal performance in Colombia: a dose-response analysis," ERSA conference papers ersa15p312, European Regional Science Association.
    3. Roman E. Romero, 2008. "Monetary Policy in Oil-Producing Economies," Working Papers 1053, Princeton University, Department of Economics, Center for Economic Policy Studies..
    4. Sajjad Faraji Dizaji & Peter A G van Bergeijk, 2013. "Potential early phase success and ultimate failure of economic sanctions," Journal of Peace Research, Peace Research Institute Oslo, vol. 50(6), pages 721-736, November.
    5. Reyes-Loya, Manuel Lorenzo & Blanco, Lorenzo, 2008. "Measuring the importance of oil-related revenues in total fiscal income for Mexico," Energy Economics, Elsevier, vol. 30(5), pages 2552-2568, September.
    6. Farzanegan, Mohammad Reza, 2011. "Oil revenue shocks and government spending behavior in Iran," Energy Economics, Elsevier, vol. 33(6), pages 1055-1069.
    7. Farzanegan, Mohammad Reza & Raeisian Parvari, Mozhgan, 2014. "Iranian-Oil-Free Zone and international oil prices," Energy Economics, Elsevier, vol. 45(C), pages 364-372.
    8. Mohammad Reza Farzanegan & Sajjad Faraji Dizaji, 2014. "Political Institutions and Government Spending Behavior in Iran," MAGKS Papers on Economics 201403, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    9. Sajjad F. Dizaji & Mohammad Reza Farzanegan & Alireza Naghavi, 2016. "Political institutions and government spending behavior: theory and evidence from Iran," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 23(3), pages 522-549, June.
    10. BENYOUB, Mohammed, 2018. "L’impact De L’investissement Des Revenus Pétroliers Sur La Croissance, L’inflation Et Le Chômage : Cas D’Algérie (2000-2015) [The Impact of Oil Revenue Investment on Growth, Inflation and Unemploym," MPRA Paper 90489, University Library of Munich, Germany, revised 05 Jul 2018.
    11. Roman E. Romero, 2008. "Monetary Policy in Oil-Producing Economies," Working Papers 1053, Princeton University, Department of Economics, Center for Economic Policy Studies..
    12. Dizaji, Sajjad Faraji, 2014. "The effects of oil shocks on government expenditures and government revenues nexus (with an application to Iran's sanctions)," Economic Modelling, Elsevier, vol. 40(C), pages 299-313.
    13. Sajjad Faraji Dizaji, 2019. "Trade openness, political institutions, and military spending (evidence from lifting Iran’s sanctions)," Empirical Economics, Springer, vol. 57(6), pages 2013-2041, December.
    14. Yu Hsing, 2004. "Impacts of macroeconomic policies on the Mexican output," Global Economic Review, Taylor & Francis Journals, vol. 33(1), pages 85-94.

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