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10 - Subnational Development and Fiscal Federalism

from Part III - A Focalised View of Sustainable Development

Published online by Cambridge University Press:  04 January 2024

Omar A. Guerrero  and
Gonzalo Castañeda
Omar A. Guerrero
Affiliation:
The Alan Turing Institute, London
Gonzalo Castañeda
Affiliation:
Centro de Investigación y Docencia Económicas
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Summary

This chapter investigates how federal transfers can boost subnational development. We analyse the case of Mexico and its 32 federal states. For this, we assemble a balanced dataset with 103 social, economic, and environmental indicators for each state. First, we study how federal transfers impacted state-level development during the sample period. Second, we analyse how changes in the distribution of transfers across states affect the indicators’ average evolution when attempting to foster all SDGs or each of them. We find that ‘fiscal contributions’ – a particular form of government transfers aimed at equalising regional disparities – exert an average impact on SDGs of around 25%–45%. Likewise, our simulations indicate that it is possible to achieve substantial impact gains when using an ‘optimal fiscal transfer’ to allocate the total federal transfers across SCGs.

Keywords

subnational developmentregional developmentSDGsMexicofiscal transferfiscal federalismdecentralised governmentfiscal imbalancecoordination rulesoptimisation heuristic
Type
Chapter
Information
Complexity Economics and Sustainable Development
A Computational Framework for Policy Priority Inference
 , pp. 265 - 288
Publisher: Cambridge University Press
Print publication year: 2024

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