Measuring the Development Impact of Local Government Spending in Mexico

How can governments measure the effectiveness of public expenditures in achieving social development goals? The present study, a partnership between Impacto Social Consultores (Mexico City) and the Columbia SIPA Workshop team, seeks to assess whether state-administered expenditures across Mexico’s 31 states and Federal District are indeed allocated towards sectors that advance the social development of its polity. The analysis consists of identifying a pertinent metric of social development. The decision was made to adopt UNDP’s Human Development Index, while building in an additional sub-index of public safety, in direct relevance to the Mexican context. Regression analyses and the resulting State Expenditure Effectiveness Index suggest a more positive (i.e. effective) coefficient on Institutional Spending, as opposed to People- Centered Spending. Taken together, the regression model and Index are an entry point for policymakers and social experts to investigate just why states that perform well within the parameters of the Index are achieving better results. On a higher level, the study begins to reveal key areas of expenditure investment that states might prioritize in achieving higher indices of social development.