Panel Paper:
Changes in Inequality of a Reformist State: The Mexican Case
Monday, June 13, 2016
:
10:25 AM
Clement House, 3rd Floor, Room 04 (London School of Economics)
*Names in bold indicate Presenter
When Peña Nieto became the 57th President of Mexico in 2012, a wave of major structural reforms was set in motion. The new government had pledged to be the most reformist in recent history, by addressing early on critical economic areas such as Energy, Education, Labor, and Tax Reform. Its aim was to modernize the country economic system as it was considered obsolete to the standards of modern and developed societies. The contention of this research paper is that after these reforms were put in effect, in particular the one relative to the new system of taxation, the levels of social inequality have risen for the country as a whole and in particular for some demographic groups. By comparing the inequality levels before and after the new taxation system with effect on January 2014, small business owners appear to be the ones more affected with the reform. This analysis of the levels of inequality is based on the data provided by the National Employment Surveys focused on understanding the labor force and unemployment in Mexico, officially called National Employment and Occupation Survey (ENOE). The survey’s database contains micro-level data on demographics such as gender, age, and education; including also salaries and remunerations and the necessary information to classify individuals between employed and unemployed and grouped them in different industries. By using an interrupted time series design with a pooled cross sectional specification for 2005 to 2015, this research attempts to identify if the policy intervention has a negative effect on the levels of inequality in the Mexican context. As an extension of this analysis, this paper also identifies if the Augmented Kuznets hypothesis (Conceição and Galbraith, 2000) is present. The argument is that when more advanced economies have reached a level of modernization, inequality appears to increase once again, regardless of having higher levels of income. Countries in this stage, experience post-Kuznets conditions, with high income levels accompanied of an increase of inequality.
