Changes in Wage Inequality in Mexico: A Decomposition Analysis

Abstract

We analyse the changes in earnings inequality in Mexico and the Mexican regions from 1987 to 2008. Using the Jenkins-van Kern decomposition method, we distinguish two major components: progressivity, which reflects the pro-poor (or pro-rich) orientation of wage growth, and re-ranking, which measures the movements of individuals in the wage hierarchy. At the national level, progressivity has been systematically pro-poor, but re-ranking has to a large extent offset this pro-equality dynamic. Similar variations are found for the Mexican regions. The South, the Border and the Centre have, however, witnessed a decrease in inequality, whereas inequality has increased in the North and the Capital regions.