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The Rise and Fall of Income Inequality in Mexico, 1989-2010

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Author Info

  • Raymundo Campos

    ()
    (Center for Economic Studies, El Colegio de Mexico)

  • Gerado Esquivel

    ()
    (Center for Economic Studies, El Colegio de Mexico)

  • Nora Lustig

    ()
    (Department of Economics, Tulane University)

Abstract

Inequality in Mexico rose between 1989 and 1994 and declined between 1994 and 2010. We examine the role of market forces (demand and supply of labour by skill), institutional factors (minimum wages and unionization rate), and public policy (cash transfers) in explaining changes in inequality. We apply the "re-centered influence function" method to decompose changes in hourly wages into characteristics and returns. The main driver is changes in returns. Returns rose (1989-1994) due to institutional factors and labour demand. Returns declined (1994-2006) due to changes in supply and-to a lesser extent-in demand; institutional factors were not relevant. Government transfers contributed to the decline in inequality, especially after 2000.

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File URL: http://econ.tulane.edu/RePEc/pdf/tul1201.pdf
File Function: First Version, 2012
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Bibliographic Info

Paper provided by Tulane University, Department of Economics in its series Working Papers with number 1201.

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Length: 45 pages
Date of creation: Mar 2012
Date of revision:
Handle: RePEc:tul:wpaper:1201

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Keywords: inequality; wages; disposable income; labour markets; Mexico;

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References

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  1. Gerardo Esquivel, 2011. "The Dynamics of Income Inequality in Mexico since NAFTA," Journal of LACEA Economia, LACEA - LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION.
  2. David Fairris & Gurleen Popli & Eduardo Zepeda, 2008. "Minimum Wages and the Wage Structure in Mexico," Review of Social Economy, Taylor & Francis Journals, vol. 66(2), pages 181-208.
  3. Victor Chernozhukov & Ivan Fernandez-Val & Blaise Melly, 2008. "Inference On Counterfactual Distributions," Boston University - Department of Economics - Working Papers Series wp2008-005, Boston University - Department of Economics.
  4. Airola, Jim & Juhn, Chinhui, 2005. "Wage Inequality in Post-Reform Mexico," IZA Discussion Papers 1525, Institute for the Study of Labor (IZA).
  5. Manoj Atolia, 2002. "Trade Liberalization and Rising Wage Inequality in Latin America: Reconciliation with HOS Theory," Working Papers wp2002_03_01, Department of Economics, Florida State University, revised Feb 2006.
  6. Sergio Firpo & Nicole M. Fortin & Thomas Lemieux, 2009. "Unconditional Quantile Regressions," Econometrica, Econometric Society, vol. 77(3), pages 953-973, 05.
  7. Fortin, Nicole & Lemieux, Thomas & Firpo, Sergio, 2011. "Decomposition Methods in Economics," Handbook of Labor Economics, Elsevier.
  8. Ben Jann, 2008. "A Stata implementation of the Blinder-Oaxaca decomposition," ETH Zurich Sociology Working Papers 5, ETH Zurich, Chair of Sociology, revised 14 May 2008.
  9. Cragg, Michael Ian & Epelbaum, Mario, 1996. "Why has wage dispersion grown in Mexico? Is it the incidence of reforms or the growing demand for skills?," Journal of Development Economics, Elsevier, vol. 51(1), pages 99-116, October.
  10. Cesar Patricio Bouillon & Arianna Legovini & Nora Lustig, 2003. "Rising Inequality in Mexico: Household Characteristics and Regional Effects," Journal of Development Studies, Taylor & Francis Journals, vol. 39(4), pages 112-133.
  11. Gasparini, Leonardo & Galiani, Sebastian & Cruces, Guillermo & Acosta, Pablo A., 2011. "Educational Upgrading and Returns to Skills in Latin America: Evidence from a Supply-Demand Framework, 1990-2010," IZA Discussion Papers 6244, Institute for the Study of Labor (IZA).
  12. Nora Lustig, 2011. "Scholars Who Became Practitioners: the Influence of Research on the Design, Evaluation and Political Survival of Mexico's Anti-poverty Program Progresa/Oportunidades," Working Papers 1123, Tulane University, Department of Economics.
  13. Esquivel, Gerardo & Rodriguez-Lopez, Jose Antonio, 2003. "Technology, trade, and wage inequality in Mexico before and after NAFTA," Journal of Development Economics, Elsevier, vol. 72(2), pages 543-565, December.
  14. Marco Manacorda & Carolina Sanchez-Paramo & Norbert Schady, 2005. "Changes in Returns to Education in Latin America: the Role of Demand and Supply of Skills," CEP Discussion Papers dp0712, Centre for Economic Performance, LSE.
  15. Almeida dos Reis, Jose Guilherme & Paes de Barros, Ricardo, 1991. "Wage inequality and the distribution of education : A study of the evolution of regional differences in inequality in metropolitan Brazil," Journal of Development Economics, Elsevier, vol. 36(1), pages 117-143, July.
  16. Raymond Robertson, 2007. "Trade and Wages: Two Puzzles from Mexico," The World Economy, Wiley Blackwell, vol. 30(9), pages 1378-1398, 09.
  17. Robertson, Raymond, 2004. "Relative prices and wage inequality: evidence from Mexico," Journal of International Economics, Elsevier, vol. 64(2), pages 387-409, December.
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Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. The Rise and Fall of Income Inequality in Mexico: 1989-2010
    by Maximo Rossi in Wikiprogress América Latina on 2012-03-12 13:30:00
  2. The Rise and Fall of Income Inequality in Mexico, 1989-2010
    by maximorossi in NEP-LTV blog on 2012-03-23 23:05:59
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Cited by:
  1. Nora Lustig, Luis F. Lopez-Calva, Eduardo Ortiz-Juarez, 2012. "Declining Inequality in Latin America in the 2000s: The Cases of Argentina, Brazil, and Mexico," Working Papers 307, Center for Global Development.

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  1. Nora Lustig in Wikipedia (English)

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