North border local infrastructure financing and fiscal institutions: validating the northern bordeeffect

Abstract

The objective is to acknowledge local fiscal revenue as a tool to finance infrastructure, by estimating the border effect on the collection of the property tax. A panel data set (2010-2019) of the Mexican municipalities is used to estimate different models by fixed effects. The results show that border municipalities collect $69 to $75 Mexican pesos per capita more than non-border municipalities. We argue about the use of local sources to finance infrastructure on the north border region of Mexico. In the estimation of the border effect, compared to previous studies, we use a broader database that includes all Mexican municipalities. We conclude that institutional differences are important for explaining differences and evolution in the collection of property tax. Local sources of funding, in the face of the need for infrastructure, can be exploited if there is an adequate institutional framework.