Analysing public debt in the Mexican states: Spatial convergence, regional drivers and policy recommendations

Abstract

Considering that public debt is a priority for policymakers in Mexico, the aim of this paper is to examine the convergence or divergence in debt per capita and main drivers of debt in the 32 Mexican states in the period 2006–2021. The results support significant spatial correlation of debt/cap across states. Cross‐section and spatial dynamic regressions are used to analyse absolute and conditional beta‐convergence in debt per capita, and the divergence assumption is documented. The panel data models based on the method‐of‐moments quantile models and pooled mean group estimators indicate that poverty is the main determinant of debt, whereas foreign direct investment is insufficient to support the reduction in debt in the long run. These results provide evidence for a set of policy recommendations to ensure a sustainable debt path in Mexico.

The impact of digital inclusive financial development on local government expenditure: Evidence from China

“…Simionescu and Cifuentes-Faura (2023) examine the main drivers of per capita debt in 32 Mexican states over the period 2006–2021. The results of the study show that poverty is identified as the main determinant of debt [ 9 ]. Moreover, digital inclusive finance, through income and growth effects, can influence entrepreneurial activities within households, leading to increased household income [ 10 ].…”

Tax structure, government debt, and the relative power of local education supply

“…However, based on economic rationality and the economic performance appraisals of promotion incentives, local governments are likely to prioritize their own interests and thus increase investment in productive projects for economic development and reduce investment in livelihood projects. In relevant researches on foreign countries, Cifuentes-Faura et al [ 35 ] and Simionescu et al [ 36 , 37 ] believe that in order to reduce deficits and alleviate debt crises, the Spanish municipalities and Mexican states has had to control public expenditures such as local education.…”