The Informal Economy of Veracruz State During the Fox Administration

Abstract

Using recently available night lights and electricity consumption data for the 212 municipios (counties) of Veracruz state in southern Mexico, the informal economy is analyzed at the Mexican county level for the first time with such data. Most counties between 2000 and 2006 are found to have growing informal economies though the richest county, Boca Del Rio, exhibits a decline in informality suggesting a few wealthier counties may behave differently. Counties have a larger formal economy if they are in northern areas, have higher literacy rates, and more indigenous people. The informal economy appears to have reversed its declining share of total economic activity towards more growth during the Fox era though the regional government of Veracruz remained in the hands of the PRI perhaps limiting federal reform efforts.

Keywords: Veracruz, Informal Economy, Night Lights

JEL Classification: R3, O1, F00