Impact of fiscal incentives on metropolitan industrial deconcentration: the case of Jalisco

Abstract

The aim of this article is to ascertain whether policies concerning fiscal incentives have had any impact on the deconcentration of industrial activity in the metropolitan area of the city of Guadalajara. It is proposed that when formulating the official decrees on fiscal incentives (the 1979 decree, and the 1986 decree, which superseded it), due attention was not paid to the process that gives rise to concentration in the country's major cities, as well as to the factors that determine the location of firms and individuals. Among the main factors underlined is the importance of agglomeration economies.

On the basis of an analysis of data for 1965-1985, the conclusion is reached that the tendency toward a concentration of industry in the metropolitan area of Guadalajara persist. In fact, the territorial sphere of concentration is spreading to neighboring municipalities. Similarly, emphasis is placed on the lack of impact of fiscal incentives and of a series of other measures. Therefore, greater selectivity is recommended in the allocation of such incentives among different zones, branches of industry, and firms of varying sizes, for the purpose of promoting industrial specialization in certain localities; encouraging the establishment of industries where the agglomeration economies of the metropolitan area of Guadalajara can be taken advantage of without aggravating urban congestion; and reducing the social costs of fiscal incentives, as well as the inefficiency of the industrial system.