Public investment and economic activity in Mexico, 1925-1981

Mexican economic historiography recognizes the key role that public investment played in the country's economic performance from the post-revolutionary period until the beginning of the economic liberalization that began in the mid-1980s. However, there is no concrete empirical evidence that this was the case. In this study, the authors construct a historical database of public investment - both total and broken down into its main components - for the period from 1925 to 1981, in order to measure the impact it had on economic activity. Given the possible presence of crowding-out effects between public investment and private investment, in their analysis the authors control for the latter. The results suggest that public investment had a significant impact on output one which varies depending on the category of public investment considered.