Heidi J. Smith

Non-Resident Fellow

Research Project: Budgeting for Growth: State Legislation and Fiscal Responsibility in Mexico

Research Interests: Political economy, international development, fiscal sustainability, subnational debt, federalism, social equity, urban policy, democracy, polarization

Heidi J. Smith studies local public finances and municipal debt as a proxy to understand how local administrations make decisions on their economic development. . Smith’s dissertation examined the effects of fiscal decentralization on economic development by studying three cities in the State of Guanajuato, Mexico — San Miguel de Allende, Guanajuato and Leon — in comparison to three cities in Santa Fe, Argentina: Santa Fe, Rosario and Rafaela. The research finds that community-level engagement in the public decision-making process was more important for promoting democracy and economic growth than the national process of fiscal decentralization or federal reform policies.

After finishing her Ph.D. at Florida International University, she earned a Fulbright Scholarship to study the municipal bond market in Mexico. For the past decade her research has focused on the decision making of local and subnational governments. By using a large-N dataset, studies have used a political economy approach to analyze why some governments use different debt instruments, testing theories of polarization, party ideology, regulation, tax compliance and public managers' capacity to plan across metropolitan regions. Fiscal rules approved by the Mexican Congress in 2015 were created to maximize subnational debt issuances, but several government failures continue to exist in the fiscal federalism framework.  With a quick glance of the regulatory framework for state budgets within the federation, some Mexican states’ policies focus around the existing concept of fiscal responsibility and balance, while others focus on fiscal discipline. There are two sometimes conflicting, sometimes complementary approaches to fiscal responsibility that have been in academic literature and have infiltrated into the economic policy debate: should governments adhere to strict budget balance and discipline (financial) for the public budget, or should they seek growth and development at all costs? The proposed research at UC San Diego will evaluate state budgeting plans to promote growth.