Factors Driving Changes in Income Distribution in Post-Reform Mexico
DOI:
https://doi.org/10.29201/peipn.v4i7.265Keywords:
Income Inequality, Economic LiberalisationAbstract
After 1984 and following economic liberalisation, income inequality in Mexico increased. Some of the main factors that contributed to this trend are the relative expansion of the average income in the service sector in relation to the agricultural and manufacturing sectors, which is consistent with arguments such as the rise of services and the reduction of rents in the traded sector, the increase in skill premium, which is in keeping with the skill enhancing trade hypothesis, and the fall in unionisation rates. On the other hand, between 1998 and 2002, inequality fell gradually and some of the factors driving this trend are the decrease in returns to skill and union premium, and the stabilisation of unionisation rates. This trend is consistent with arguments suggesting temporary adverse effects and cycles in the evolution of income inequality over the longer-run. Households re-composition and transfer income are factors that mitigate inequality, whereas deterioration of the agricultural sector is a persistent sources of income dispersion.
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