This paper explores the relationship between changes in state public expenditure and citizens' perceptions of corruption in Mexican state governments between 2011 and 2013. The author analyzes data on public expenditure, development indicators, and corruption perceptions from surveys. A regression model is used to test the hypothesis that increases in state public expenditure are linked to higher perceived corruption. However, the results show the regression model does not meet assumptions of significance. While some outliers are identified, removing them still does not produce a significant model. Therefore, the hypothesis that higher expenditure increases are linked to greater perceived corruption cannot be confirmed based on this analysis. More research is needed to better understand citizens' lack of trust in government institutions and changes in public spending.

1. JOURNAL OF PUBLIC ECONOMICS 1
The influence of State public expenditure on
corruption in Mexico: the relationship between
changes in State Public Expenditure and citizens
corruption perception of State Governments (2011
2013)
Author, M.A. Student, Central European University
Abstract—The perceptions of State level corruption in Mexico
have been denounced widely due to the lax accountability frame-
works of each state. Citizens presume that State bureaucrats
plunder resources from the budgets at a higher rate than
public servants at the federal level. This paper explores the
relation between State public expenditure and State perception
of corruption changes in 2011 and 2013. Indicators from INEGI
and the United Nations Development Program related to the
expenditure, development and corruption perception of the 32
States were utilized in a linear regression. The results showed
that there was not a significant connection between these two
categories.
Keywords—State level expenditure, development, corruption,
transparency reform, accountability, corruption perception.
I. INTRODUCTION
The ineffective execution of accountability policies by the
State level governments has led to a gradual increase of
distrust among Mexican citizens towards the government,
especially when it comes to public expenditure at the State
level. According to a recent survey, 75 percent of Mexicans
stated that corruption in Mexico kept increasing from 2007 to
2010 (Transparency International, 2013).
Although there has been progress in expenditure account-
ability at the federal level, it has not been on the par at the
State or Local levels of government1
. The main question for
this research is whether there is a connection between the
real percentage changes of State expenditure and relation to
corruption. Hence, I pose the following hypothesis: Ascending
public expenditure exercises are linked to corruption, and thus,
the bigger the increase of the State expenditure, the stronger
is the perception of corruption in each State. A similar study
of 28 European countries determined that both if there were
decreases in public expenditure allocated to education that
corruption perception grew (Sironi Tornari, 2013).
1In 2013, the President’s Office proposed 9 different political reforms,
one of which dealt with the unification of transparency at the three levels
of governments in order to improve the flow and quality of accountability
information (Presidencia de la Republica, 2014).
A. Data and Analysis
In order to trace a statistical relationship between these
expenditure levels and corruption perception, a multivariate
regression must be implemented to test the hypothesis. The
dependent variable is the average expenditure change from the
2011 2013 period. This variable in particular was constructed
by converting the nominal figures of expenditure from each
year to 2013 pesos so that all of the expenditure data are
equivalent. Subsequently, the figures was coupled with the
GDP of each state to gauge the public expenditure to GDP
ratio (e.g. the public expenditure of Aguascalientes rose from
5.10 percent to 5.55 percent in terms of GDP). Lastly, these
ratios were combined to get the percentage change in this
interval. The final computation is the triennial growth of public
expenditure in terms of State GDP. Both the results from
the Governments Quality and Impact National Survey and
the State expenditure data have been published in reports
elaborated by the Geographic and Statistics Bureau of Mexico
(INEGI). The coding for the dependent variable will be XP1.
Correspondingly, there were three independent variables
used in this model. The main one is the State Corruption
Index that was constructed from the Governments Quality and
Impact National Survey. The latter was conducted nationwide
by INEGI in 2011 and 2013. Since there have been two
editions of the survey, a paired difference had to be extracted to
estimate the changes of corruption perception for both surveys.
In other words, the recorded score of the 2011 survey from
each state was unified the corresponding score of 2013 to track
the change of perception in this time frame (e.g. the corruption
perception in Chihuahua rose by 3.4 points). CP1 will be one
of the independent variables.
The PG variable represents the perception difference of the
satisfaction with state level public goods, which were also
taken from the Governments Quality and Impact National
Survey of 2011 and 2013. If the levels of public expenditure
change, then there might be trends that might be linked with
the quality of state public goods. Citizens graded the quality
of public goods from a 0 to 100 scale and thus the difference
in scores of both surveys was recorded.
The IDH variable depicts the change of the Human Devel-
opment Index of each state from 2011 to 2013. This indicator

2. JOURNAL OF PUBLIC ECONOMICS 2
is made yearly by the United Nations Development Program
with the cooperation of INEGI. The value of the index goes
from 0 to 1. The purpose of this variable is to determine if the
proportional changes of public expenditure in each state can be
linked to an increase or drop of the Human Development Index
of each state. Henceforth, the model will be the following:
XP1 = β0 + β1 ∗ CI1 + β2 ∗ PG + β3 ∗ IDH + e
B. Results
After computing the regression, the initial prognosis of the
results displayed that the confidence levels of each relationship
were not significant. Table I reflects that none of the regres-
sions reached a probability above of 70 percent. The corre-
lation between the independent variables and the dependent
variables did not reach significance levels as well. Although,
normal distribution did show up on the three variables; the
median value of the distribution was -0.005.
TABLE I.
Dependent variable:
XP
P1 0.001
(0.001)
IDH −0.041
(0.836)
PG −0.001
(0.001)
Constant −0.005
(0.011)
Observations 32
R2
0.109
Adjusted R2
−0.023
Residual Std. Error 0.033 (df = 27)
F Statistic 0.825 (df = 4; 27)
Note: ∗
p<0.1; ∗∗
p<0.05; ∗∗∗
p<0.01
Secondarily, the linearity of the model was visualized to
trace the linear performance of each regression. The scatter
plots of the model did not exhibit linearity in the three
regressions, the QQ plot did not have an inclined pattern and
three outliers were identified in the Cook distance plots.
II. DISCUSSION
In summary, the multivariate regression model could not
meet essential assumptions to acquire significance. The prob-
lem with outliers is one of the main issues that were en-
countered. The three cases that sprung out were the States of
Tabasco, Distrito Federal and Tamaulipas. Both Tabasco and
Distrito Federal2
had unusual increases in public expenditure
in terms of GDP and the opposite happened to Tamaulipas.
Another test was performed where these outliers were removed
but others kept surfacing anyway. Table II presents the regres-
sion model without the outliers, which did show significance
28.2 percent and 10.2 percent growth of expenditure in terms of GDP
respectively.
levels of confidence with the regression between XP and P1.
Nevertheless, we cannot count out these three outliers for we
would compromise the integrity of the results.
TABLE II.
Dependent variable:
XP
P1 0.001∗
(0.001)
IDH −0.193
(0.469)
PG −0.0004
(0.001)
Constant −0.011
(0.007)
Observations 29
R2
0.165
Adjusted R2
0.065
Residual Std. Error 0.020 (df = 25)
F Statistic 1.648 (df = 3; 25)
Note: ∗
p<0.1; ∗∗
p<0.05; ∗∗∗
p<0.01
In any case, the hypothesis could not be confirmed and
thus more questions surface, especially for the three outliers
that were identified. Regardless of this, the origin of the
distrustfulness of Mexicans towards their institutions and the
expenditure changes need more exploration through alternative
quantitative and qualitative methods.
REFERENCES
[1] Instituto Nacional de Estadstica y Geografa INEGI (2015) En-
cuesta Nacional de Calidad e Impacto Gubernamental (ENCIG) 2011.
[Online] Available at: http://www.inegi.org.mx/est/contenidos/ proyec-
tos/encuestas/hogares/especiales/encig /2011/default.aspx [Accessed 6
December 2015].
[2] Instituto Nacional de Estadstica y Geografa INEGI (2015) En-
cuesta Nacional de Calidad e Impacto Gubernamental (ENCIG) 2013.
[Online] Available at: http://www.inegi.org.mx/est/contenidos/ proyec-
tos/encuestas/hogares/ especiales/encig/2013/default.aspx [Accessed 6
December 2015].
[3] Presidencia de la Repblica (2014) Reforma en materia de Transparen-
cia, Gobierno Federal de la Repblica Mexicana, [Online Available at:
http://reformas.gob.mx/wp-content/uploads/2014/06/[Accesed November
24 2015]
[4] Transparency International (2013) Global Corruption Barometer 2013,
Transparency International, Germany.
[5] Sironi, Emiliano Martina, Tornari (2013) Corruption, Political Instability
and Public Finance in Europe , International Journal of Monetary
Economics and Finance 6, no. 2 3, 203 12.