The Sources of Democratic Responsiveness in Mexico

Chapter Five. Testing Hypotheses about Responsiveness: The Public Finance Approach

c h a p t e r f i v e Testing Hypotheses about Responsiveness The Public Finance Approach the previous chapter presented some surprising findings. With respect to the provision of public services, the available evidence suggests that the primary political source of responsive government is to be found in levels of political participation and engagement . There is very little evidence to support the view that municipal governments are rendered more responsive through mechanisms of electoral accountability; nor did we uncover significant evidence of an interactive effect. In my view, the evidence on this point is unambiguous . Yet there are several reasons to probe the matter further, including the strong priors that many scholars hold in favor of the electoral hypothesis and the inherent difficulty in supporting strong causal inferences with large-N correlational analyses. In this chapter, I deepen the empirical analysis by introducing an alternative approach to measuring government performance, based on municipal financial data. This approach offers a useful counterpoint to the analysis from chapter 4 because it is less vulnerable to the objections that I raised against the public utility measures. The empirical results based on municipal financial indicators are largely consistent with the findings in the previous chapter, even though the two approaches to 119 120 The Sources of Democratic Responsiveness in Mexico measurement are only tangentially related. Thus I conclude that the results presented here are likely not the result of idiosyncrasies in the measurement of the dependent variable. The Public Finance Approach to Measuring Government Performance If, for whatever reason, a municipal government becomes more active in the pursuit of the public interest, we should be able to find evidence of its efforts in the municipality’s financial record. Budget data for the vast majority of Mexican municipalities are available for each year since 1989, and the data include breakdowns of municipal income sources and spending patterns.1 There may be several ways to employ these data as indicators of government performance.2 This section focuses on one strategy that has strong intuitive and theoretical appeal. I use budget data to calculate the amount of municipal revenue that is raised locally, both as a raw total (pesos per capita) and as a percentage of the municipality’s total revenue.3 All municipalities are able to raise their own revenue through taxes, fees, and fines (Rodríguez 1997, 127).4 However, before the mid-1980s these revenue sources were widely mismanaged, if they were exploited at all. After the 1983 constitutional reform that granted municipal governments formal autonomy over several issue areas, municipalities reacted differently to pressures for modernization and responsiveness. The data suggest that some began to systematize the collection of local taxes, while others failed to take advantage of the potential revenue source. For example, Cabrero Mendoza and Orihuela (2000) find that large cities were more likely to take advantage of local revenue sources, possibly because cities have a larger tax base from which to draw revenue . The collection of local revenue can be seen as an attempt by the municipality to increase its capacity, modernize, and provide better services (see Grindle 2006).5 It is a good measure of performance, not because it measures a municipality’s financial capacity for utility provision , but because it signals whether the municipality has undertaken efforts to modernize its bureaucratic capacity and increase its efficiency. Testing Hypotheses: Public Finance 121 So this statistic has a clear application to our main hypotheses. Electoral theories, including the accountability and selection mechanisms introduced in chapter 2, would predict that municipal governments raise more local revenue when they have competitive electoral environments . In contrast, participatory theories would predict that municipalities with higher levels of mass political activity would generate higher local revenues. The best way to generate a measure based on local income is simply to calculate the total pesos collected locally, per capita. Adjusted for inflation , this measure should reflect a level of local income that is comparable over time and across cases. Local revenue per capita is not affected by any concomitant changes in other revenue sources or spending patterns . It may be affected by local macroeconomic conditions, but we can control for such effects by including income measures in our analysis. Further, by including a lagged value of this indicator in multivariate analysis, we can in effect estimate an equation on the change in pesos per capita from one year to the next...