The impact of the bottom-up approach towards economic development on population
mobility across Mexican municipalities
Abstract
Recently, a notable number of case studies stress the favourable impact of bottom-up
development policies on population well-being in comparison to a lack of satisfactory
achievements of national government interventions. In addition, since 1990 scholars and
experts across the non-governmental and multilateral organisations world have increasingly
supported a sub-national response to the development challenges and opportunities
stemming from economic globalisation and financial crisis. Arguably, the better awareness of
localities‟ particularities make local agents the best fitted for balancing local interests, and
proposing development actions as well as improvements in public services delivery. As a
consequence, the role of sub-national levels of government has been changing in
developed and developing countries. In this context, this study analyses quantitatively the
effect of the fundamental features and policy actions of the bottom-up or local economic
development approach (LED) on population mobility among the lowest level of government
jurisdictions in Mexico. This paper finds significant evidence of a positive impact of LED
strategies on immigration across Mexican municipalities during the period between 1990 and
2005.
Keywords: Public finance, fiscal federalism, local economic development (LED), Mexico,
immigration, public policy
1. Introduction
Policy interventions of different levels of government can have an impact on the
development of places. Nevertheless, recently a noteworthy number of case studies draw
attention to the positive impact of bottom-up or local economic development (LED)
strategies on the economic and social development of sub-national entities in contrast to a
shortage of success of national government policies (Pike, et al., 2006). Furthermore, since
1990 academics, non-governmental organisations (NGO‟s) and multilateral organisations
such as the Organisation for Economic Cooperation and Development (OECD), the United
Nations Development Programme (UNDP) and the World Bank (WB) have increasingly
argued in favour of a local or sub-national response to the development prospects and
challenges posed by the globalisation of the world economy (Cities Alliance, 2007; OECD,
1993; Smoke, 2001).
, 2
The popularity of LED interventions has risen notably over the last two decades, essentially as
a result of what has been perceived as a failure of top-down or centre-led development
strategies to deliver (Boisier, 1999; Puga, 2002; Crescenzi and Rodríguez-Pose, 2008).
Numerous national approaches to development have fallen short to solve market failures
and to create a solid base for economic development in a context of increasing
globalisation and economic risks (Potter et al., 1999, Vázquez-Barquero, 2011). As a
consequence, since the outset of the 1990s, an increasing number of sub-national authorities
across the world have been actively engaged in the design and implementation of policy
actions which increasingly embrace specific features of LED strategies (Blakely and
Bradshaw, 2002; Pike et al., 2006). Apart from the lack of effectiveness of top-down
approaches to address the challenges of economic globalisation and economic downturns
during more than the last two decades, democratisation processes in developing countries
have intensified the decentralisation phenomenon and initiated a surge of LED strategies
(Camejo and Gallicchio, 2004; Pike, et al. 2006). Mexico has not been the exception (Mazza
and Parga, 1999; Ruiz-Durán, 2000a and 2000b).
According to public finance academics such as Smoke (2001) and Weingast (2008), fiscal
federalism theorists attribute a significant relevant role to sub-national levels of government in
the allocation of resources for public services delivery because demand for many public
services is not homogeneous across territories. In a setting where there is the possibility to
migrate, individuals will move to a place where local authorities provide a satisfactory
combination of public goods in terms of their preferences (Tiebout, 1956).
In this context, this paper analyses quantitatively the effect of the key characteristics and
policies of the LED approach on population mobility among Mexican municipalities during
the period between 1990 and 2005. The research hypothesis is that the municipalities where
more LED constituents were identified during the period of analysis experienced better
development processes, quality of life prospects and, as a consequence, attracted
individuals along with families from other parts of the country and abroad.
It is noteworthy to mention that this analysis follows the research by Rodríguez-Pose and
Palavicini-Corona (2012) which, for the first time, clearly identified the constituents of the
bottom-up approach and assessed quantitatively their impact on the development of
places, in general, and Mexico, in particular. The main difference with the study proposed
here is that their paper focuses on development outcomes while this in both development
prospects and outcomes. In addition, this paper puts forward different model specifications
which incorporate another main independent variable and allow the introduction of new
relevant interactions between variables. All this contributes to emphasise an increasingly
, 3
(although slow) active role of municipal authorities in pursuing economic and social
development during the period of analysis.
2. The bottom-up approach and public finance theory: What is all about?
The fundamental idea of the bottom-up approach is to identify and make the best use of
the development potential of a particular geographical area where a population is
established (Cheshire and Gordon, 1996). Although the economic aspect of development is
a central part, the process of LED is determined by different local attributes including the
prevailing local ties of different nature (i.e. social, socio-political, linguistic, cultural and
economic, among others) (Storper, 1995). This territorial dimension also entails the
participation in the development process of local actors from the private, social and public
sectors (Stöhr, 1990). This is deemed to generate development policies which are more
coherent and effective than central or national government interventions (Hugonnier, 1999;
Pike, et al. 2006; Ruiz-Durán, 2005).
In the realm of public finance theory, the branch of fiscal federalism studies which
governmental responsibilities and interventions are more suitable for central authorities and
which are best placed in the domain of sub-national levels of government. In one of his
seminal papers, Oates (1999) stresses the benefits of a more active role in public goods
provision of sub-national authorities in developing countries as this paragraph illustrates (p.
1143):
„There remains, in my view and that of some others (Shah 1994), a strong
case on traditional grounds for a significant degree of decentralization in
public-sector decision-making in developing nations. This case, as we
have discussed, rests both on the potential economic gains from adapting
levels of public outputs to specific regional or local conditions and on the
political appeal of increased participation in governance.‟
Public finance experts acknowledge that not only population preferences are important. The
efficient use of public resources to satisfy such demand is also crucial (Ardavín, 2009; Merino,
2000). Finding an efficient decentralised area for public goods delivery is not simple because
optimal areas vary depending on the particular service to be provided. Existing political
jurisdictions are not always the most convenient in terms of efficient provision of specific
public services (Smoke, 2001; Weingast, 2008). The bottom-up approach towards economic
development offers a practical solution to this problem because not only integrates
population demands by promoting local agents participation in public policy decision-
making and implementation, but also encourages development linkages with external
mobility across Mexican municipalities
Abstract
Recently, a notable number of case studies stress the favourable impact of bottom-up
development policies on population well-being in comparison to a lack of satisfactory
achievements of national government interventions. In addition, since 1990 scholars and
experts across the non-governmental and multilateral organisations world have increasingly
supported a sub-national response to the development challenges and opportunities
stemming from economic globalisation and financial crisis. Arguably, the better awareness of
localities‟ particularities make local agents the best fitted for balancing local interests, and
proposing development actions as well as improvements in public services delivery. As a
consequence, the role of sub-national levels of government has been changing in
developed and developing countries. In this context, this study analyses quantitatively the
effect of the fundamental features and policy actions of the bottom-up or local economic
development approach (LED) on population mobility among the lowest level of government
jurisdictions in Mexico. This paper finds significant evidence of a positive impact of LED
strategies on immigration across Mexican municipalities during the period between 1990 and
2005.
Keywords: Public finance, fiscal federalism, local economic development (LED), Mexico,
immigration, public policy
1. Introduction
Policy interventions of different levels of government can have an impact on the
development of places. Nevertheless, recently a noteworthy number of case studies draw
attention to the positive impact of bottom-up or local economic development (LED)
strategies on the economic and social development of sub-national entities in contrast to a
shortage of success of national government policies (Pike, et al., 2006). Furthermore, since
1990 academics, non-governmental organisations (NGO‟s) and multilateral organisations
such as the Organisation for Economic Cooperation and Development (OECD), the United
Nations Development Programme (UNDP) and the World Bank (WB) have increasingly
argued in favour of a local or sub-national response to the development prospects and
challenges posed by the globalisation of the world economy (Cities Alliance, 2007; OECD,
1993; Smoke, 2001).
, 2
The popularity of LED interventions has risen notably over the last two decades, essentially as
a result of what has been perceived as a failure of top-down or centre-led development
strategies to deliver (Boisier, 1999; Puga, 2002; Crescenzi and Rodríguez-Pose, 2008).
Numerous national approaches to development have fallen short to solve market failures
and to create a solid base for economic development in a context of increasing
globalisation and economic risks (Potter et al., 1999, Vázquez-Barquero, 2011). As a
consequence, since the outset of the 1990s, an increasing number of sub-national authorities
across the world have been actively engaged in the design and implementation of policy
actions which increasingly embrace specific features of LED strategies (Blakely and
Bradshaw, 2002; Pike et al., 2006). Apart from the lack of effectiveness of top-down
approaches to address the challenges of economic globalisation and economic downturns
during more than the last two decades, democratisation processes in developing countries
have intensified the decentralisation phenomenon and initiated a surge of LED strategies
(Camejo and Gallicchio, 2004; Pike, et al. 2006). Mexico has not been the exception (Mazza
and Parga, 1999; Ruiz-Durán, 2000a and 2000b).
According to public finance academics such as Smoke (2001) and Weingast (2008), fiscal
federalism theorists attribute a significant relevant role to sub-national levels of government in
the allocation of resources for public services delivery because demand for many public
services is not homogeneous across territories. In a setting where there is the possibility to
migrate, individuals will move to a place where local authorities provide a satisfactory
combination of public goods in terms of their preferences (Tiebout, 1956).
In this context, this paper analyses quantitatively the effect of the key characteristics and
policies of the LED approach on population mobility among Mexican municipalities during
the period between 1990 and 2005. The research hypothesis is that the municipalities where
more LED constituents were identified during the period of analysis experienced better
development processes, quality of life prospects and, as a consequence, attracted
individuals along with families from other parts of the country and abroad.
It is noteworthy to mention that this analysis follows the research by Rodríguez-Pose and
Palavicini-Corona (2012) which, for the first time, clearly identified the constituents of the
bottom-up approach and assessed quantitatively their impact on the development of
places, in general, and Mexico, in particular. The main difference with the study proposed
here is that their paper focuses on development outcomes while this in both development
prospects and outcomes. In addition, this paper puts forward different model specifications
which incorporate another main independent variable and allow the introduction of new
relevant interactions between variables. All this contributes to emphasise an increasingly
, 3
(although slow) active role of municipal authorities in pursuing economic and social
development during the period of analysis.
2. The bottom-up approach and public finance theory: What is all about?
The fundamental idea of the bottom-up approach is to identify and make the best use of
the development potential of a particular geographical area where a population is
established (Cheshire and Gordon, 1996). Although the economic aspect of development is
a central part, the process of LED is determined by different local attributes including the
prevailing local ties of different nature (i.e. social, socio-political, linguistic, cultural and
economic, among others) (Storper, 1995). This territorial dimension also entails the
participation in the development process of local actors from the private, social and public
sectors (Stöhr, 1990). This is deemed to generate development policies which are more
coherent and effective than central or national government interventions (Hugonnier, 1999;
Pike, et al. 2006; Ruiz-Durán, 2005).
In the realm of public finance theory, the branch of fiscal federalism studies which
governmental responsibilities and interventions are more suitable for central authorities and
which are best placed in the domain of sub-national levels of government. In one of his
seminal papers, Oates (1999) stresses the benefits of a more active role in public goods
provision of sub-national authorities in developing countries as this paragraph illustrates (p.
1143):
„There remains, in my view and that of some others (Shah 1994), a strong
case on traditional grounds for a significant degree of decentralization in
public-sector decision-making in developing nations. This case, as we
have discussed, rests both on the potential economic gains from adapting
levels of public outputs to specific regional or local conditions and on the
political appeal of increased participation in governance.‟
Public finance experts acknowledge that not only population preferences are important. The
efficient use of public resources to satisfy such demand is also crucial (Ardavín, 2009; Merino,
2000). Finding an efficient decentralised area for public goods delivery is not simple because
optimal areas vary depending on the particular service to be provided. Existing political
jurisdictions are not always the most convenient in terms of efficient provision of specific
public services (Smoke, 2001; Weingast, 2008). The bottom-up approach towards economic
development offers a practical solution to this problem because not only integrates
population demands by promoting local agents participation in public policy decision-
making and implementation, but also encourages development linkages with external
