Mexico

Take-up of voluntary financial education programs is typically extremely low. This paper reports on randomized experiments around a large financial literacy course offered... Show More + in Mexico City to understand the reasons for low take-up, and to measure the impact of financial education. It documents that the general public displays little interest in such courses and that participation is low even among individuals who express interest in financial education. The paper experimentally investigates barriers to take-up, and finds no impact of relaxing reputational or logistical constraints and no evidence that time inconsistency is the reason for limited participation. Even relatively sizeable monetary incentives get less than 40 percent of interested individuals invited to training to attend. Using a randomized encouragement design, the authors measure the impact of the course on financial knowledge and behavior. Attending training results in a 9 percentage point increase in financial knowledge and a 9 percentage point increase in saving outcomes, but no impact on borrowing behavior. Administrative data indicate that the savings impact is relatively short-lived. The results suggest people are making optimal choices not to attend financial education courses, and point to the limits of using general purpose courses to improve financial behavior for the general population. Show Less -

This note presents an overview of Mexico's forthcoming reform agenda-from the World Bank's vantage point. It distills the main messages in the policy notes that make... Show More + up this compendium. The purpose is not to provide definitive answers to the many policy questions likely to occupy the New Mexican administration, or to provide a comprehensive account of progress to date and policy recommendations. Instead, it is to provide a view of the main challenges facing Mexico in its quest for inclusive and sustainable growth-and to propose feasible policy options to address them. Mexico has achieved remarkable economic and social progress over the past several decades. The country has become an investment grade borrower with solid global standing in capital markets. It is a model of financial and commercial integration and of prudent macroeconomic management. The economic literature offers several explanations for Mexico's low productivity growth. An underdeveloped financial system, labor market rigidities, high informality, scarce skilled labor, regulatory barriers for doing business, and weak innovation and limited market competition are often cited as binding constraints to productivity growth. Mexico faces challenges as it seeks to develop a labor market that protects workers, creates more and better jobs for men and women, and improve their long term standard of living. Finally, a comprehensive system for tracking and monitoring progress and environmental pressures needs to be developed. Show Less -

This note outlines a short, to medium-term reform agenda to foster sound financial sector development. Mexico needs to broaden and deepen its financial system without... Show More + compromising the financial stability gains of the last decade. Much more private investment is needed to transform the economy to boost productivity, and despite improvements in recent years, many households and firms still lack adequate access to financial services. Using the financial payments system to promote financial inclusion is a sound way to broaden access. However, experience in several countries has shown that accelerated (or forced) expansion of credit can harm rather than benefit customers. If financial institutions do not follow sound practices, they can fail, harming borrowers and depositors alike and creating social unrest. Institutional failures may also lead to costly bailouts, with substantial fiscal cost. An oversight system (both micro, and macro, prudential) that encourages prudent-risk taking and facilitates prompt resolution of failed institutions ensures that strategies for financial deepening do not compromise financial stability. Show Less -

Reducing the footprint of growth requires a focus on three key issues: a) transforming urban areas into greener, more efficient, resilient, and socially inclusive cities,... Show More + better able to capture the economic benefits associated with urbanization; b) ensuring sound management of the brown environmental agenda to provide the conditions for continued sustainable economic green growth while preventing and minimizing negative impacts and risks for human health and the environment; and c) promoting energy efficiency in housing, transport, urban infrastructure, and waste management to enhance the sustainability and competitiveness of the Mexican economy. Show Less -

This note presents an overview of Mexico's forthcoming reform agenda-from the World Bank's vantage point. It distills the main messages in the policy notes that make... Show More + up this compendium. The purpose is not to provide definitive answers to the many policy questions likely to occupy the New Mexican administration, or to provide a comprehensive account of progress to date and policy recommendations. Instead, it is to provide a view of the main challenges facing Mexico in its quest for inclusive and sustainable growth-and to propose feasible policy options to address them. In its quest for inclusive growth Mexico needs to address four main challenges. These key challenges are: 1) to increase productivity; 2) to ensure that poorer segments of society benefit from and are able to contribute to the growth process; 3) to combine the economic and environmental aspects of sustainable development; and 4) to strengthen public finances and improve government efficiency. Mexico has achieved remarkable economic and social progress over the past several decades. In recent years, Mexico has made progress in supporting a more competitive business environment and streamlining of business regulations. Recent reforms sought to improve investment and competition in the telecommunications sector. But a more ambitious reform is required to boost productivity. Show Less -

To achieve higher growth and reduce poverty and inequality, Mexico needs to improve public service delivery. Mexico is a middle-income country with continuing high levels... Show More + of poverty (46.2 percent of the population). To improve public sector service delivery, Mexico needs to ensure sufficient financial and human resources relative to the needs of the population, and effective and efficient public management of spending programs to address those needs-two basic prerequisites for an effective public sector. Mexico's public service delivery is hindered by low tax collection and expenditure inefficiencies at all three levels of government: federal, state, and municipal. Mexico's tax collection is also low by Latin American standards. The problem of low tax collection is particularly acute at the local level, as many subnational governments lack incentives and administrative capacity. At the local level, improving tax collection faces additional challenges. Low subnational tax collection increases the volatility of subnational finances within Mexico's fiscal federalism framework. Subnational governments need incentives and assistance to improve their tax administration to increase own revenues. As part of an ambitious strategy to modernize public sector financial management, the government has started to harmonize the public accounts and accounting practices of the federal and subnational governments. Show Less -

Mexico's intergovernmental transfer system needs to reduce vertical imbalances and discretionary federal transfers. This note assesses Mexico's pending subnational fiscal... Show More + reform agenda. Mexico is a federal country divided into 31 sovereign states and one federal district. Each state is composed of municipalities. The fiscal federalism framework in this three-tier government structure consists of the set of laws, rules, and institutions that allocate spending and tax responsibilities and of the transfers and institutional framework for the subnational debt. Mexico has made great progress in strengthening its fiscal federalism framework over the past 10 years, but there is room for improvement. The pending Mexican fiscal federalism reform should focus on decreasing the large vertical gaps that states face, increasing local revenue mobilization, increasing the transparency and effectiveness of local expenditures, and strengthening the subnational borrowing framework to improve states' fiscal discipline. A clearer distinction between federal and state expenditure responsibilities, especially in the basic education sector, could improve service delivery. A more transparent debt reporting is also needed to strengthen subnational fiscal discipline. Show Less -

A climate change vulnerability index in agriculture is presented at the municipal level in Mexico. Because the index is built with a multidimensional approach to vulnerability... Show More + (exposure, sensitivity and adaptive capacity), it represents a tool for policy makers, academics and government alike to inform decisions about climate change resilience and regional variations within the country. The index entails baseline (2005) and prediction (2045) levels based on historic climate data and future-climate modeling. The results of the analysis suggest a wide variation in municipal vulnerability across the country at baseline and prediction points. The vulnerability index shows that highly vulnerable municipalities demonstrate higher climate extremes, which increases uncertainty for harvest periods, and for agricultural yields and outputs. The index shows at baseline that coastal areas host some of the most vulnerable municipalities to climate change in Mexico. However, it also shows that the Northwest and Central regions will likely experience the largest shifts in vulnerability between 2005 and 2045. Finally, vulnerability is found to vary according to specific variables: municipalities with higher vulnerability have more adverse socio-demographic conditions. With the vast municipal data available in Mexico, further sub-index estimations can lead to answers for specific policy and research questions. Show Less -

This paper proposes a methodology to evaluate social projects from the perspective of children's opportunities on the basis of the effects of these projects on the distribution... Show More + of outcomes. The evaluation is conditioned on characteristics for which individuals are not responsible; in this case, parental education level and indigenous background. The methodology is applied to evaluate the effects on children's health opportunities of Mexico's Oportunidades program, one of the largest conditional cash transfer programs for poor households in the world. The evidence from this program shows that gains in health opportunities for children from indigenous backgrounds are substantial and are situated in crucial parts of the distribution, whereas gains for children from nonindigenous backgrounds are more limited. Show Less -

Recent research shows that employment in Mexico's offshoring maquiladora industries is twice as volatile as employment in their U.S. industry counterparts. The analyses... Show More + in this paper use data from Mexico's social security records and U.S. customs between the first quarter of 2007 and the last quarter of 2009 to identify four channels through which economic shocks emanating from the United States were amplified when transmitted into Mexico's offshoring labor market of Northern Mexico. First, employment and imports within industries are complements, which is consistent with imports being used as inputs for the assembly of exportable goods within industries. That is, when imports fell during the crisis, employment in Mexico was reduced rather than protected by the fall of imports. Second, contrary to other studies, employment is more responsive than wages to trade shocks. Third, fluctuations in Mexico-U.S. trade were associated with changes in the composition of employment, with the skill level of workers rising during downturns and falling during upswings. This implies that the correlation between average wages and trade shocks is partly driven by labor-force compositional effects, which may obscure individual-worker wage flexibility. Fourth, trade shocks affecting related industries (industries linked by employment flows affect employment at least as much as own-industry trade shocks, thus amplifying employment volatility through the propagation of shocks across industries within Northern Mexico. Furthermore, the data suggest that the observed fluctuations in U.S.-Mexico trade at the onset of the Great Recession in the U.S. were not associated with pre-existing employment trends in Northern Mexico. Show Less -