The Rise and Fall of Income Inequality in Mexico, 1989–2010
affiliation not provided to SSRN
El Colegio de Mexico - Centro de Estudios Economicos
March 1, 2012
Tulane Economics Working Paper Series # 1201
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.
Number of Pages in PDF File: 46
Keywords: inequality, wages, disposable income, labour markets, Mexico
JEL Classification: D31, J20, J31, O54working papers series
Date posted: July 21, 2012
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