THE LONDON SCHOOL OF ECONOMICS AND POLITICAL SCIENCE LOCAL ECONOMIC DEVELOPMENT IN MEXICO THE CONTRIBUTION OF THE BOTTOM-UP APPROACH Eduardo Iván Palavicini Corona A thesis submitted to the Department of Geography and Environment of the London School of Economics and Political Science for the degree of Doctor of Philosophy London, June 2012 2 Declaration I certify that the thesis I have presented for examination for the PhD degree of the London School of Economics and Political Science is solely my own work other than where I have clearly indicated that it is the work of others. The copyright of this thesis rests with the author. Quotation from it is permitted, provided that full acknowledgement is made. This thesis may not be reproduced without my prior written consent. I warrant that this authorisation does not, to the best of my belief, infringe the rights of any third party. I declare that my thesis consists of 75,000 words. 3 Abstract This thesis examines the contribution of the bottom-up approach towards local economic development (LED) in Mexico. It applies a combination of methodologies to assess if the growing importance of this approach in the public policy arena is supported by a more focused and systematic analysis. In doing so, the aim is to offer a broader and deeper understanding of the key elements of the bottom-up perspective and their specific impact on the economic and social development of places, by considering a large sample of Mexican municipalities; and to better comprehend the effects of local actions and interactions on the shape and effectiveness of those key elements by focusing on two municipalities, which have adopted different strategies. The first part of the empirical analysis uses a quantitative methodology and presents – to the best of our knowledge – the first nationwide quantitative assessment of the impact of the constituents of the bottom-up approach on the development fortunes of local jurisdictions. The analysis relies on a purpose-built database of 898 municipalities in Mexico and on heteroscedasticity-consistent ordinary least square (OLS) regression methods to evaluate whether the implementation of six different components of the bottom-up development strategies – development plan, sustainability, entrepreneurship, capacity building, participation mechanisms, and development links – has delivered greater human development across Mexican municipalities. The results of the analysis indicate that municipalities engaging in LED have witnessed improvements in human development, relative to those which have overlooked it. The increase in human development has been greatest for those local authorities which have pursued capacity building, the establishment of development links and which have drafted a development plan based on a local diagnosis. The second part of the analysis uses a case-study methodology to dig deeper on two Mexican municipalities – Apizaco and Chiautempan – located in Tlaxcala, one of the Mexican states which has set up an institutional framework aimed at encouraging greater participation. Our findings reveal that while the implementation of certain aspects of the bottom-up approach have had a clear relevant positive contribution to economic and social development, a series of local challenges have clearly shaped the effectiveness of the LED strategies applied in both municipalities. In addition, the analysis shows that Apizaco, the local authority which pursued LED in a more comprehensive way, experienced a greater improvement in socio-economic development. 4 Acknowledgements This research was mostly funded by the Mexican Council of Science and Technology (CONACYT). It has been a privilege to be supervised by Andrés Rodríguez Pose. I am especially grateful for his invaluable guidance, encouragement, continuous support and friendship. I take this opportunity to express my gratitude to all the academics who made possible the construction of the LED database for Mexican municipalities and all the participants in the case studies. In particular, I thank to scholars at El Colegio de Tlaxcala, A.C. I am grateful to the Environment and Geography Department and to the LSE for their financial support at some point during my studies. I thank the helpful comments of professors and classmates within the department. I am grateful to my review supervisor Riccardo Crescenzi and my friends Guilherme Resende and Tulio Cravo for their interest in my work and feedback. I express my gratefulness to Dr. Simona Iammarino and Dr. Antonio Vázquez Barquero, who were the examiners of this thesis, for contributing to strengthen its contents with their detailed observations. I thank my flatmates at Sidney Webb House and Braemar Road for their friendship and allowing me to share my PhD experience. From all my friends, Guan and his wife Jingyi deserve a special mention. I cannot express in words my gratitude for their help during difficult times. Most especially, I am very grateful to my mother Doña Anita who never gave up encouraging me to study my PhD since I was studying my master‟s degree in 1998. I also thank my sister Gaby for her good example and encouragement. I thank both for their unconditional love. My heartfelt thanks to my father Don Antonio, who, although was not able to witness this stage of my life, would have been immensely happy and supportive. 5 Table of Contents CHAPTER 1: Introduction.................................................................................................... 9 CHAPTER 2: An introduction to the bottom-up approach towards the development of places.............................................................................................................................. 14 1. Introduction............................................................................................................ 14 2. The bottom-up approach: conceptual background and the links between practice and theory.............................................................. 14 3. LED definitions and their main elements............................................................. 22 4. What has been wrong with the top-down approach?.................................... 25 5. Words of caution and criticisms to the bottom-up approach......................... 30 6. Final considerations and remarks......................................................................... 32 CHAPTER 3: The bottom-up perspective to economic development: key features and policies........................................................................................................................ 36 1. Introduction........................................................................................................... 36 2. The fundamental elements of the bottom-up approach............................... 36 3. The rationale for the application of bottom-up strategies in Latin America and Mexico........................................................................................................... 47 4. Considerations for studying the bottom-up approach in Mexico.................. 55 5. Final remarks and conclusions.............................................................................. 61 CHAPTER 4: The contribution of the bottom-up approach towards economic development: a quantitative approach to analyse Mexican municipalities.............. 64 1. Introduction............................................................................................................ 64 2. Human development: a development index for Mexican municipalities...... 65 3. Municipal development indexes in Mexico in 1990 and 2005......................... 72 4. The concept of human development and the LED approach....................... 82 5. The proposed model............................................................................................. 88 6. Concluding remarks.............................................................................................. 95 ANNEX 1: Map 1. Regional Division of Mexico.......................................................... 97 ANNEX 2: LED database: Questionnaire................................................................... 98 CHAPTER 5: Quantitative assessment of the bottom-up approach in Mexican municipalities: findings, conclusions and further research........................................... 100 1. Introduction........................................................................................................... 100 2. LED database and model diagnostics............................................................... 101 3. Findings................................................................................................................... 108 4. Conclusions and final remarks............................................................................. 116 ANNEX: Tables and figures of correlations and multicollinearity tests................... 120 CHAPTER 6: Qualitative analysis of the bottom-up approach in Mexico: selection and background of case studies.................................................................................... 123 1. Introduction........................................................................................................... 123 2. Institutional context............................................................................................... 125 3. The bottom-up approach in Tlaxcala................................................................. 131 4. Tlaxcala‟s main physical, population and economic features......................