Association for Public Policy Analysis & Management

Corruption has deterring the financial health of several state governments in Mexico that have been subject of recent scandals, but also of a systematic corruption at all levels of public institutions. This study responds to the question of to what extent corruption influences the financial sustainability of Mexican states. Financial sustainability represents the ability to manage expected financial risks and shocks over the long-term financial planning period, without compromising the future generations. To answer the research questions an appropriate methodology was devised attending the limited set of official information that is publicly available. A structural equation model is proposed using a dataset built for the period 2011-2016 by using indicators for assessing financial sustainability, corruption and controlling by social, economic and political contexts. Fiscal health has become a buzzword in the political discussion, however still more research is needed in order to understand the phenomenon an design better policies to tackle the problem.