Abstract

VAZQUEZ MUNOZ, Juan Alberto. Investment socialization and tax reform: The Mexican case, 1950-2020. Inv. Econ [online]. 2021, vol.80, n.318, pp.72-97.  Epub Nov 30, 2021. ISSN 0185-1667.  https://doi.org/10.22201/fe.01851667p.2021.318.79252.

Based on Keynes’ arguments, this paper aims to show that, even assuming an equilibrated primary fiscal balance, it can be possible to use fiscal policy to stabilize the equilibrium output, increase the output growth rate and disposable income, and relax the external constraint on growth. Our theoretical arguments are empirically tested for the case of Mexico. As shown, after the debt crisis of the last century, Mexican policymakers maintained a primary balance equilibrium rule. However, a significant public expenditure reduction was implemented, primarily concentrated on public investment, which has negatively affected economic growth and the trade balance as a percentage of the Gross Domestic Product (GDP). We argue that it is necessary to increase public revenues, mainly through a tax reform, to implement an investment socialization program.

Keywords : Tax reform; fiscal policy; public investment; growth; Mexico.

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