Can Education Explain Changes in Income Inequality in Mexico?
By César Bouillon, Arianna Legovini, Nora Lustig (12/01, En)
This working paper is being published with the sole objective of contributing to the debate on a topic of importance to the region, and to elicit comments and suggestions from interested parties. This paper has not gone through the Department's peer review process or undergone consideration by the SDS Management Team. As such, it does not reflect the official position of the Inter-American Development Bank.
This study analyzes the microeconomic determinants of the large increase in inequality experienced by Mexico between 1984 and 1994. Using the Mexican National Household Income-Expenditure Surveys, it estimates a fully specified model of the labor market including earnings and participation equations. It applies a regression-based decomposition technique to explore the impact of participation decisions and occupational choice, returns and endowments effects on the changes in income distribution. It finds that education plays a pivotal role in the determination of changes in income inequality, and policy should address both the private incentives for investing in education and the availability and access to educational facilities. Furthermore, It confirmes the previous finding that rural conditions have seriously deteriorated relative to urban conditions, substantially contributing to increased income inequality.
Last updated: 04/26/07
