The financial defense of public programs. The case of the dismantling of Seguro Popular in Mexico

Abstract

This article aims to verify how local governments behave whenface reduction or disappearance of a centrally financed public program. It isinvestigated whether local governments mobilize their own resources to keepthe program running in their territory. The article combines categories fromthe policy dismantling literature and economic theory to analyze the financialbehavior of local governments in the face of systematic transfer budget reductions.Using a panel-type model for the 32 federal entities of Mexico receivinga public health financing program known as ‘Seguro Popular’ in the period2012-2021, we find evidence of the existence of a symmetrical flypaper effect,which suggests that local governments use their tax faculties to use their ownresources to finance the program when transfers increase, but do not do sowhen transfers decrease.