Economic Inequality and Intergenerational Transfers: evidence from Mexico

Transcription

1 Economic Inequality and Intergenerational Transfers: evidence from Mexico Iván Mejía-Guevara Harvard School of Public Health Ninth Meeting of the Working Group on Macroeconomic Aspects of Intergenerational Transfers, Barcelona June / 5

2 Acknowledgement National Institute on Aging: NIA, R37-AG25488 and NIA, R1-AG25247 Andrew Mason Ronald Lee IDRC/ECLAC Edgard Rodríguez, Tim Miller, Paulo Saad 2 / 5

3 Outline Introduction Methodology NTA by SES: Mexico 24 NTA by SES: Mexico 1994 vs. 24 Conclusions Appendix 3 / 5

4 Introduction 4 / 5

5 Per capita labor income and consumption: 23 economies around 2 Source: Tung (211). 5 / 5

6 Lifecycle deficit: Mexico Relative to mean YL Labor income Consumption Source: Mejía-Guevara (211). 6 / 5

7 Funding sources for persons 65 and older Source: Mason and Lee (211). 7 / 5

8 Income inequality It has the potential to undermine the economic prosperity of nations and their political stability (Stiglitz, 212) - There is little income mobility the notion of America as a land of opportunity is a myth. - And America has more inequality than any other advanced industrialized country... Latin America has been traditionally regarded as the most unequal region of the world (Gasparini et al., 21; Gasparini and Lustig, 211) Rent seeking: Mexico - Extreme wealth and corporate control in the business sector: Monopolistic corporations (PEMEX, TELCEL, TELMEX, TELEVISA, etc...) - Groups that were part of Mexico s corporatist inheritance: Unions (Education, PEMEX, Electricity, etc...) 8 / 5

9 Inequality in Latin America and the World Inequality in Latin America and the world Share of deciles in income distribution Gini coefficients Countries around the world Latin America Africa 4 55 Asia Developed Eastern Europe & Central Asia Latin America Rest of the world Source: Gasparini (24) based on Bourguignon and Morrison (22). 2 Source: Gasparini et al. (21). 9 / 5

10 Inequality in Latin America A map of inequality in Latin America Gini coefficient Distribution of household per capita income Around 26 MEX RDO GUA HND ELS NIC CRI PAN VEN COL ECU PER BRA BOL PAR CHI ARG URU < > 58 No data Source: Gasparini et al. (21). 1 / 5

11 BMV: Cencentration Source: Perezcano (211): 11 / 5

12 Good news? Reduction of inequality in Latin America during the 2s (Gasparini and Lustig, 211) Factors behind a decreased in inequality (Gasparini and Lustig, 211). 1. Fall in the earnings gap of skilled/low-skilled workers, 2. Increase in government transfers targeted to the poor. 12 / 5

13 Income Inequality in Mexico Inequality in Mexico Gini coefficient using alternative income definitions Source: Esquivel, Lustig and Scott (21). 13 / 5

14 Progresa/Oportunidades and other subsidy programs 4, 35, 3, Million pesos (25=1) 25, 2, 15, 1, 5, Other focalized subsidies Generalized subsidies Progresa-Oportunidades Source: Own wint information from SHCP. 14 / 5

15 Methodology 15 / 5

16 Socioeconomic status (SES) Stratum Level of education Years of education (completed) I Non, kindergarten, or incomplete primary [, 6) II Primary, or incomplete lower secondary [6, 9) III Lower secondary, or incomplete upper secondary [9, 16) IV Undergraduate, Master, or PhD 16 or more 16 / 5

17 Assumptions Flow identity: C (x) Y l (x) = τ + (x) τ + (x) + Y a (x) SY l (x). Flow identity (subpopulation): C (x, s) Y l (x, s) = τ + (x, s) τ + (x, s) + Y a (x, s) SY l (x, s). 17 / 5

18 NTA by SES: Mexico / 5

19 Lifecycle deficit: Mexico Relative to mean YL Labor income Consumption Source: Mejía-Guevara (211). 19 / 5

20 Lifecycle deficit by SES: Mexico 24 I II Relative to mean YL Relative to mean YL Labor income Consumption Labor income Consumption III IV Relative to mean YL Relative to mean YL Labor income Consumption Labor income Consumption * dashed lines represent national averages. Source: Own based on ENIGH 1994 and / 5

21 Per capita age reallocations: Mexico 24 1 National Relative to mean YL LCD TG TF ABR Source: Mejía-Guevara (211). 21 / 5

22 Per capita age reallocations by SES: Mexico 24 I II Relative to mean YL Relative to mean YL LCD TG TF ABR LCD TG TF ABR III IV 3 Relative to mean YL Relative to mean YL LCD TG TF ABR LCD TG TF ABR Source: Own based on ENIGH 1994 and / 5

23 Funding sources for young and the elderly by SES: 24 Stratum 1 Stratum % of total consumption % of total consumption _ YL TF TG ABR _ YL TF TG ABR Stratum 3 Stratum % of total consumption % of total consumption _ YL TF TG ABR _ YL TF TG ABR Source: Own based on ENIGH 1994 and / 5

24 NTA by SES: Mexico 1994 vs / 5

25 Labor income by age: 1994 vs. 24 Labor Income 1 Relative to mean YL Source: Own based on ENIGH 1994 and / 5

26 Labor income by age and SES: 1994 vs Relative to mean YL Relative to mean YL I II III IV National I II III IV National Source: Own based on ENIGH 1994 and / 5

27 Total consumption by age: 1994 vs Consumption Relative to mean yl Source: Own based on ENIGH 1994 and / 5

28 Education spending by age: 1994 vs Private and public Relative to mean yl Source: Own based on ENIGH 1994 and / 5

29 Education spending by age and SES: 1994 vs Relative to mean yl Relative to mean yl I II III IV National I II III IV National Source: Own based on ENIGH 1994 and / 5

30 Education spending by SES: 1994 vs Private and Public % of total consumption per stratum I II III IV National Source: Own based on ENIGH 1994 and / 5

31 Education spending by SES: 1994 vs. 24 Private Public % of total consumption per stratum % of total consumption per stratum I II III IV National I II III IV National Source: Own based on ENIGH 1994 and / 5

32 Health spending by SES: 1994 vs Private and Public % of total consumption per stratum I II III IV National Source: Own based on ENIGH 1994 and / 5

33 Health spending by SES: 1994 vs. 24 Private Public 5 5 % of total consumption per stratum % of total consumption per stratum I II III IV National I II III IV National Source: Own based on ENIGH 1994 and / 5

34 Lifecycle deficit: 1994 vs Lifecycle deficit Relative to mean yl Source: Own based on ENIGH 1994 and / 5

35 Net public transfers: 1994 vs Net public transfers Relative to mean yl Source: Own based on ENIGH 1994 and / 5

36 Net public transfers by age and SES: 1994 vs Relative to mean yl Relative to mean yl I II III IV National I II III IV National Source: Own based on ENIGH 1994 and / 5

37 Cash transfers: 1994 vs Cash transfers % of total consumption per stratum I II III IV National Source: Own based on ENIGH 1994 and / 5

38 Public pensions: 1994 vs Pensions % of total consumption per stratum I II III IV National Source: Own based on ENIGH 1994 and / 5

39 Net private transfers by age: 1994 vs Net private transfers.8 Relative to mean yl Source: Own based on ENIGH 1994 and / 5

40 Asset-based reallocations by age: 1994 vs Asset-based reallocations Relative to mean yl Source: Own based on ENIGH 1994 and / 5

41 Funding sources for young and elderly: 1994 vs % of total consumption % of total consumption _ _ YL TF TG ABR YL TF TG ABR Source: Own based on ENIGH 1994 and / 5

42 Conclusions 42 / 5

43 Conclusions Income inequality is a persistent phenomenon in Mexico, but it has declined recently, Recent evidence suggests that a fall in the earnings gap of skilled/low-skilled workers and an increase in government transfers targeted to the poor are factors that explain this reduction in inequality, An analysis of Mexican NTA between 1994 and 24 supports that evidence, NTA analysis by SES reveals very important differences in the reallocation of economic resources among subgroups. Specifically, it suggests that, compared to 1994, inequality of labor income was reduced and public cash transfers and education became substantially more progressive and, thus better targeted to the poor one decade later. 43 / 5

44 Appendix 44 / 5

45 BMV: Cencentration 34.5% 42.2% Foreign financial groups Grupo Carso and Affiliates Other 23.3% Source: Perezcano (211): 45 / 5

46 Total consumption by age and SES: 1994 vs Relative to mean yl Relative to mean yl I II III IV National I II III IV National Source: Own based on ENIGH 1994 and / 5

47 Lifecycle deficit by SES: 1994 vs Relative to mean yl Relative to mean yl I II III IV National I II III IV National Source: Own based on ENIGH 1994 and / 5

48 Net private transfers by age and SES: 1994 vs. 24 Relative to mean yl I II III IV National Relative to mean yl I II III IV National Source: Own based on ENIGH 1994 and / 5

49 Asset-based reallocations by age and SES: 1994 vs Relative to mean yl Relative to mean yl I II III IV National I II III IV National Source: Own based on ENIGH 1994 and / 5

50 Funding sources for young and the elderly by SES: 1994 Stratum 1 Stratum % of total consumption % of total consumption _ YL TF TG ABR _ YL TF TG ABR Stratum 3 Stratum % of total consumption % of total consumption _ YL TF TG ABR _ YL TF TG ABR Source: Own based on ENIGH 1994 and / 5