Labor Income and Poverty in Brazil and Mexico: A State Level Analysis, 2000–2009

During the twentieth century, Latin America had a continuing history of income distribution inequality, accompanied by high poverty levels (Engerman and Sokollof 1997; Williamson 2009). For the first decade of the twenty-first century, (Lopez-Calva and Lustig 2010) writing on the results of a large research project, present evidences of a common process of diminishing inequality and poverty in many Latin American countries. Nevertheless (Helwege and Birch 2007) give a cautionary tale, showing that ample differences exist among inequality measures among the Latin American economies. Two countries stand out in that process because of their relative economic size and because of the contrasting economic policy paths observed in recent years: Brazil and Mexico. As the following table shows, both countries exhibited a common fall of their Gini indexes as well as of their poverty headcount ratios. However, after 2007, those paths started to show divergences: While Brazilian data shows a continuing improvement towards more income equality and lower poverty levels, Mexican data shows a rising level of income inequality and growing poverty levels. It should be noticed that, in the case of Mexico, improvement in the 2010 Gini index is a consequence of income falls both for the richest and poorest families.