The geography of financial condition in the Mexico City metropolitan area

There has been academic and policy concern about the financial capacity of administratively fragmented metropolitan areas to implement inclusive development measures and provide public services. Metropolitan public financing is problematic because there is a geographical mismatch between extended functional urban regions and administrative units. While local governments are responsible for implementing policies, spending, and raising revenues, financial capacity tends to differ across jurisdictions in response to economic, social and political factors, resulting in manifold disparities. Such variations can be particularly acute depending on the complexity and size of the metropolitan area, and can lead to major spatial disparities in the life standards of residents. This paper focuses on the local financial condition in Mexico City Metropolitan Area, which is often used to exemplify a fragmented metropolitan area. Official statistics from 1989 to 2018 are used to identify major intra-metropolitan variations in the financial condition of local governments. A novel methodology is used to classify municipalities according to their financial health, and discriminant analysis is used to explore the factors shaping the geography of financial performance. The economic and demographic size of municipalities appear to play a significant role.