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The technical efficiency of local economies in Mexico: a failure of decentralized public spending

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Listed:
  • Alejandro U. Becerra-Ornelas

    (Pardee RAND Graduate School)

  • Hector M. Nuñez

    (Centro de Investigación y Docencia Económicas)

Abstract

This work analyses the effect of the institutional design of public spending on technical efficiency. The model controls for technical efficiency using institutional variables for earmarked and autonomous revenues and assesses them using two stochastic frontier models. The main findings show that expenditures by Mexican municipalities, regardless of type, reduce the technical efficiency of local production. Results support the Brennan–Buchanan collusion hypothesis that decentralization generates an increase in government spending, but it does not translate to higher social welfare.

Suggested Citation

  • Alejandro U. Becerra-Ornelas & Hector M. Nuñez, 2019. "The technical efficiency of local economies in Mexico: a failure of decentralized public spending," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 62(2), pages 247-264, April.
    • Handle: RePEc:spr:anresc:v:62:y:2019:i:2:d:10.1007_s00168-018-0894-1
    DOI: 10.1007/s00168-018-0894-1
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    More about this item

    JEL classification:

    • R1 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics
    • R5 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis
    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations
    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables

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