Growth with Equity for the Development of Mexico: Poverty, Inequality, and Economic Growth (1992–2008)

This paper constitutes an attempt to determine the relative contribution of changes in economic growth and in the distribution of income to changes in poverty in Mexico. Our findings clearly indicate that growth with redistribution (lower income inequality) was the key to reducing poverty continuously and in an important manner during 2000–2006. However, after 2006, decreasing per-capita income, coupled with the persistently high inequality (Gini of 52%), caused the reversal of the favorable trend observed since 1996, raising poverty to pre-2002 levels. Consequently, it is argued that, for Mexico, a middle-income country exhibiting quite low growth rates and high inequality levels, the further improvement in its distribution of income and assets is essential if the economy is to succeed in making a real dent in poverty. For that purpose, the implementation of an active pro-poor growth policy should be strongly encouraged.