42nd Congress of the European Regional Science Association: "From Industry to Advanced Services - Perspectives of European Metropolitan Regions", August 27th - 31st, 2002, Dortmund, Germany
Understanding the sources of regional economic growth in Mexico is important. Hence, in this paper, I will briefly discuss developments in the theory of economic growth and discuss the theoretical work in the Mexican context, and review some of the more recent empirical studies dealing with public infrastructure and economic growth. The development of regions in the periphery is of special concern to the development of the Mexican Economy. The regional planning approach in Mexico emphasizes strategic, geographically-focused investments in infrastructure, and the application of industrial policies to influence the location of industries and foster the development of inter-industry linkages. The Mexican states are diverse in terms of geographic, demographic, and economic characteristics. Between the 1980's and the 2000's, the lagging regions of the south remained among the poorest, while the regions with above average per capita incomes remained in the North and in the area near Mexico City. However, there is adequate evidence to suggest the existence of and increase in regional disparities in Mexico. For example, Diaz-Bautista (2000) showed regional output disparities among selected states in Mexico. The objectives of this paper are twofold. First, the relationship between public policies and regional growth in Mexico is examined. This includes a discussion on the effects of infrastructure on regional development. Second, the role of public investments in the development of the Mexican states is also examined. The specific question addressed is whether the varying incidence of public infrastructure investments influenced the development patterns of lagging, intermediate and leading states. This paper is divided into four main parts. The first part provides the background and motivation for the study. The second part highlights the need to examine regions as the unit of analysis and reviews the literature of the relationship between infrastructure investments and regional growth. The third part examines the efficacy of infrastructure investments in the development of the Mexican states. This section presents the data, choice of methodology, model specification, the econometric model and the results from the empirical analysis. The final section presents some policy implications and directions for future research.