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Micro-Incentives and Municipal Behavior: Political Decentralization and Fiscal Federalism in Argentina and Mexico

Author

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  • Smith, Heidi Jane M.
  • Revell, Keith D.
Abstract
This article analyzes the mixed results of political and fiscal decentralization in Latin America by comparing taxing and spending policies in six cities in Argentina and Mexico. Consistent with previous studies, we find that decentralization has been frustrated by overconcentration of power at the provincial level and large vertical fiscal imbalances, though we characterize these as functional elements in a system of redistributive policy-making that benefits a wide array of provincial and municipal actors. We seek to add a new dimension to the literature by arguing that micro-level incentives (conditions and circumstances particular to specific places) are more important determinants of municipal behavior than macro-level structures (those policy and institutional changes intended to make officials more responsive to local conditions – federalism, local elections, intergovernmental transfers, and own-source revenues). We conclude that the theory of decentralization relies on a flawed conception of the causal mechanisms that are hypothesized to create responsiveness in local officials.

Suggested Citation

  • Smith, Heidi Jane M. & Revell, Keith D., 2016. "Micro-Incentives and Municipal Behavior: Political Decentralization and Fiscal Federalism in Argentina and Mexico," World Development, Elsevier, vol. 77(C), pages 231-248.
    • Handle: RePEc:eee:wdevel:v:77:y:2016:i:c:p:231-248
    DOI: 10.1016/j.worlddev.2015.08.018
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    Cited by:

    1. Heidi Jane Smith, 2019. "Increasing Decision Making Capacities of Local Governments: Mexico?s Quest for Economic Growth," Working Paper Series Sobre México 2019002, Sobre México. Temas en economía.
    2. Caldeira, Thiago Costa Monteiro & Ehrl, Philipp & Moreira, Tito Belchior Silva, 2023. "Fiscal decentralization and tax collection: evidence from the rural property tax in Brazil," European Journal of Political Economy, Elsevier, vol. 78(C).
    3. Nils Droste & Claudia Becker & Irene Ring & Rui Santos, 2018. "Decentralization Effects in Ecological Fiscal Transfers: A Bayesian Structural Time Series Analysis for Portugal," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 71(4), pages 1027-1051, December.
    4. Droste, Nils & Becker, Claudia & Ring, Irene & Santos, Rui, 2017. "Decentralization effects in ecological fiscal transfers: The case of Portugal," UFZ Discussion Papers 3/2017, Helmholtz Centre for Environmental Research (UFZ), Division of Social Sciences (ÖKUS).
    5. Liu, Dayong & Xu, Chunfa & Yu, Yongze & Rong, Kaijian & Zhang, Junyan, 2020. "Economic growth target, distortion of public expenditure and business cycle in China," China Economic Review, Elsevier, vol. 63(C).
    6. Samford, Steven, 2022. "Decentralization and local industrial policy in Mexico," World Development, Elsevier, vol. 158(C).
    7. Li, Lei & Luo, Changtuo, 2023. "Does administrative decentralization promote outward foreign direct investment and productivity? Evidence from China," Economic Modelling, Elsevier, vol. 124(C).
    8. Sopaheluwakan, William R.I. & Fatem, Sepus M. & Kutanegara, Pande M. & Maryudi, Ahmad, 2023. "Two-decade decentralization and recognition of customary forest rights: Cases from special autonomy policy in West Papua, Indonesia," Forest Policy and Economics, Elsevier, vol. 151(C).
    9. Fengqin Qin, 2022. "Fiscal Expenditure Structure, Vertical Fiscal Imbalance and Environmental Pollution," IJERPH, MDPI, vol. 19(13), pages 1-21, July.
    10. Keliang Wang & Bin Zhao & Tianzheng Fan & Jinning Zhang, 2022. "Economic Growth Targets and Carbon Emissions: Evidence from China," IJERPH, MDPI, vol. 19(13), pages 1-16, June.
    11. Berenschot, Ward & Mulder, Peter, 2019. "Explaining regional variation in local governance: Clientelism and state-dependency in Indonesia," World Development, Elsevier, vol. 122(C), pages 233-244.

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