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Inequality reduction through self-employment under high inflation periods: the Mexican experience

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  • Mirenitzia Cárdenas
  • Héctor J. Villarreal

Abstract

We propose self-employment as an explanation for the observed reduction in inequality occurring after the Mexican economic crisis of 1995. The evidence appears as a contradiction to the labour-hoarding hypothesis, which states that inequality was expected to increase because the only asset of the poor was labour. Self-employment has been an escape to inflation and staggered wages bringing as a consequence reduced inequality. Therefore, individuals will be pushed into self employment as a means of survival if they lost their jobs in the formal sector, or pulled into self employment attracted by higher potential earnings if their wages were losing purchasing power.

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File URL: http://www.mty.itesm.mx/egap/deptos/cee/cieds/2007-2.pdf
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Bibliographic Info

Paper provided by Escuela de Graduados en Administración Pública y Políticas Públicas, Campus Monterrey in its series Working Papers with number 20072.

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Length: 26 pages
Date of creation: Jan 2007
Date of revision: May 2007
Handle: RePEc:egb:wpaper:20072

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Keywords: self employment; self-employment; inequality; crisis of 1995; informality; labour-hoarding;

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