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

Author

Listed:
  • 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.

Suggested Citation

  • Mirenitzia Cárdenas & Héctor J. Villarreal, 2007. "Inequality reduction through self-employment under high inflation periods: the Mexican experience," Working Papers 20072, Escuela de Graduados en Administración Pública y Políticas Públicas, Campus Monterrey, revised May 2007.
  • Handle: RePEc:egb:wpaper:20072
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    File URL: http://www.mty.itesm.mx/egap/deptos/cee/cieds/2007-2.pdf
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    Keywords

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

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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