Association for Public Policy Analysis & Management

Accelerated urbanization has strengthened the significance of metropolitan areas which tend to over concentrate population and economic activities. These urban concentrations face opportunities but also critical problems. Government and governance have emerged as key issues for managing metropolitan problems and for the implementation of policy actions and strategies in pursuing economic and social objectives. The government structures in place in many metropolitan areas are, generally, outdated and not well adapted to the realities they face. This is taking place within an overall context of constraints on public finances whereby municipal and metropolitan authorities are asked to do more with less. Metropolitan areas face important challenges in terms of public finances due to the confluence of various local governments which makes the management of public resources more complex.

This paper examines the performance and evolution of municipal public finances in metropolitan areas in Mexico in the period 1989-2014. From this exploration, we expect to identify the most important characteristics and problems of metropolitan public finances. Mexico is a highly-urbanized country with more than 70 percent of its population living in cities and this urbanization has taken place predominantly in metropolitan areas. The institutional and administrative structures require municipal governments to perform its functions and offer services autonomously, even if it belongs to a metropolitan area. In addition, the lack of intergovernmental coordination and the weak administrative capacity of local governments, especially the poorest and smallest ones, have negative impacts on the administration of metropolitan public finances in the country.