Can informality explain inequality? The case of Mexico, 1987-1999

Arbeitspapier

In this paper we contrast the impact of the income gap between formal and informal sector on Mexico's income inequality to alternative explanations. Unlike previous studies we take a time series approach to analyze the determinants of income inequality for the period 1987-1999. We find that an increase in the wage gap between the formal and the informal sector and in the wage gap between the higher educated and the lower educated people leads to an increase in inequality. Inequality seems to be counter-cyclical, that is, an increase in output leads to a reduction in inequality. An unexpected result is that inequality declines when output is below its long term trend. We obtained mixed results about the role played by prices and inflation on inequality.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IAI Discussion Papers ; No. 222

Classification and Topics

• Classification: Wirtschaft
• Subject: Einkommensverteilung ; Lohnstruktur ; Informeller Sektor ; Bildungsniveau ; Schätzung ; Mexiko

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Cortez, Willy W. ; Nowak-Lehmann D., Felicitas
• Event: Veröffentlichung
• (who): Georg-August-Universität Göttingen, Ibero-America Institute for Economic Research (IAI)
• (where): Göttingen
• (when): 2012

Further information

• Handle: http://hdl.handle.net/10419/92999
• Last update: 10.03.2025, 11:41 AM CET