Fiscal Decentralization in Mexico

Current research of fiscal decentralization evaluates the level of decentralization and the impacts on the fiscal effort of municipalities by measuring it or by observing the impact in terms of revenue collection. These studies are important but they do not capture the behaviour and challenges that the local administrative structure faces given the policy design and existing administrative resources. In contrast, this dissertation explores the impacts that the fiscal decentralization process has had on the fiscal effort of local administrative structures. The analysis is based on interviews, documents and partial observation of two municipalities in Mexico. This research shows that the fiscal decentralization process in Mexico has had partial positive impacts on the fiscal effort of local administrative structure. Mainly it has improved accountability. Yet, the local administrative structure has also responded by improving its rational financial choice process through the implementation of conditional grants and in the main detailed consideration of priorities, political cost and level of revenues.