An Evaluation of the 1997 Expenditure Decentralization Reform in Mexico

Abstract

This article studies the Mexican state-level impact on health outcomes of the decentralization of health funding and responsibilities that took place in 1997. Since the reform took place simultaneously in all states, we focus on a difference in difference estimation of whether those states that received more funds achieved better health outcomes after health services decentralization. According to our results, those states that received more funds did not boost the advances in health outcomes already achieved under the centralized health sector regime. There are two main possible explanations for these results. First, the allocation among states of the earmarked fund that was created as a result of the reform failed to take into account state-specific health needs. Second, the decentralization reform was not enough since it did not concede more tax autonomy to states and no other mechanisms were implemented to maintain states accountable for their health expenditure decisions.