Association for Public Policy Analysis & Management

Mexico’s indigenous people are amongst the most vulnerable and marginalized. According to Mexico's government estimates, the percentage of indigenous people who live in poverty in Mexico is nearly double that of the general population: 70.3 percent versus 38.6 percent, respectively (CONEVAL, 2016). In this context, the present study aims to explore why the gap between the indigenous and the non-indigenous population is not closing even after taking into consideration occupational differences and the rural-urban divide. This paper employs Blinder-Oaxaca decomposition techniques as well as an unconditional quantile decomposition approach with data from the National Household Expenditure Revenue Survey (ENIGH) 2016 to analyze wage differentials and the prevalence of informality among indigenous and non-indigenous people in Mexico. Understanding the underlying causes of these disparities is crucial for the design of sustainable labor market policies that may help reduce the gap between the living conditions of indigenous and non-indigenous people. Findings confirm that differences in coefficients account for a significant proportion of the indigenous earnings and welfare gap, indicating that indigenous disadvantage would persist even if human capital outcomes and access to formal employment were to improve for this population subgroup.