Institutional quality and economic competitiveness: A study of the Mexican states

Abstract

This paper aims to identify the key factors influencing competitiveness across Mexico’s sates. To achieve this, a Principal Component Analysis (PCA) is employed, a multivariate statistical technique that condenses a large number of variables into a smaller set of components, capturing the underlying interaction and variability between institutional factors and competitiveness. The analysis is based on a dataset compiled from the Instituto Mexicano para la Competitividad (IMCO) and the Instituto Nacional de Estadística y Geografía (INEGI), covering the period from 2001 to 2021. The findings reveal that competitiveness in Mexico is not driven exclusively by economic variables; institutional dimensions such as government efficiency, the rule of law, and the political system also play a significant role. These results offer important implications for the formulation and implementation of public policies aimed at enhancing institutional quality nationwide.