Fiscal Policies and Subnational Economic Growth in Mexico

Arwiphawee Srithongrung and Isaac S nchez-Ju Rez
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Arwiphawee Srithongrung: Hugo Wall School of Public Affairs Wichita State University, USA
Isaac S nchez-Ju Rez: Department of Social Sciences Universidad Aut noma de Ciudad Ju rez, Mexico
Authors registered in the RePEc Author Service: Isaac Sánchez-Juárez

International Journal of Economics and Financial Issues, 2015, vol. 5, issue 1, 11-22

Abstract: This study investigates the effects of taxes and public investment on economic growth of Mexican states. The subnational government finance data were drawn from 32 states during the period of 1993 to 2011. Correcting for long-term trends and isolating cointegration effects between economic growth and public finance, the empirical results indicate that taxes have negative effect on growth and the effect can be seen in both transitory and permanent manners. As predicted by growth theory, the effects of public investment on subnational growth are statistically significant and positive in both short and long-runs. On the other hand, we find that educational accomplishment negatively relates to growth. Foreign direct investment does not have any significant effect on subnational economic growth. In general, the results imply that an appropriate fiscal policy (equilibrium between public investment and taxes) is required to boost economic growth in this country.

Keywords: Mexico; economic growth; taxes; public investment; states. (search for similar items in EconPapers)
JEL-codes: O11 O23 O47 R11 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eco:journ1:2015-01-02

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