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


  • Campos-Vazquez, Raymundo M.
  • Esquivel, Gerardo
  • Lustig, Nora


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-centred influence function´ method to decompose changes in hourly wages into characteristics and returns. The main driver is changes in returns. Returns rose (1989-94) 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.

Suggested Citation

  • Campos-Vazquez, Raymundo M. & Esquivel, Gerardo & Lustig, Nora, 2012. "The Rise and Fall of Income Inequality in Mexico, 1989-2010," WIDER Working Paper Series 010, World Institute for Development Economic Research (UNU-WIDER).
  • Handle: RePEc:unu:wpaper:wp2012-010

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    References listed on IDEAS

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    Cited by:

    1. Abdelkrim Araar & Luis Huesca, 2014. "Comparison of the Tax System Progressivity Over Time: Theory and Application with Mexican Data," Cahiers de recherche 1419, CIRPEE.
    2. Lustig, Nora & Lopez-Calva, Luis F. & Ortiz-Juarez, Eduardo, 2013. "Declining Inequality in Latin America in the 2000s: The Cases of Argentina, Brazil, and Mexico," World Development, Elsevier, vol. 44(C), pages 129-141.
    3. Luis Felipe López-Calva & Santiago Levy Algazi, 2016. "Labor Earnings, Misallocation, and the Returns to Education in Mexico," IDB Publications (Working Papers) 7454, Inter-American Development Bank.
    4. Binelli Chiara, 2015. "How the wage-education profile got more convex: evidence from Mexico," The B.E. Journal of Macroeconomics, De Gruyter, vol. 15(2), pages 509-560, July.
    5. repec:aru:wpaper:201304 is not listed on IDEAS
    6. Luis F. López-Calva & Nora Lustig & John Scott & Andrés Castañeda, 2013. "Gasto social, redistribución del ingreso y reducción de la pobreza en México: evolución y comparación con Argentina, Brasil y Uruguay," Commitment to Equity (CEQ) Working Paper Series 1317, Tulane University, Department of Economics, revised Mar 2014.
    7. Luis Huesca Reynoso & Abdelkrim Araar, 2016. "Comparison of fiscal system progressivity over time: theory and application in Mexico," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 31(1), pages 3-45.
    8. Adams, Samuel & Atsu, Francis, 2015. "Assessing the distributional effects of regulation in developing countries," Journal of Policy Modeling, Elsevier, vol. 37(5), pages 713-725.

    More about this item


    Equality and inequality; Income; Labor market; Wages;

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • O54 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean


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