Economic Inequality and Intergenerational Transfers: evidence from Mexico Iv´an Mej´ıa-Guevara
[email protected]
Harvard School of Public Health
Ninth Meeting of the Working Group on Macroeconomic Aspects of Intergenerational Transfers, Barcelona June 3 2013
1 / 50
Acknowledgement
National Institute on Aging: NIA, R37-AG025488 and NIA, R01-AG025247 Andrew Mason Ronald Lee IDRC/ECLAC Edgard Rodr´ıguez, Tim Miller, Paulo Saad
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Outline
Introduction Methodology NTA by SES: Mexico 2004 NTA by SES: Mexico 1994 vs. 2004 Conclusions Appendix
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Introduction
4 / 50
Per capita labor income and consumption: 23 economies around 2000
Source: Tung (2011). 5 / 50
Lifecycle deficit: Mexico 2004 2004
Relative to mean YL 30-49
1.2
.8
.4
0 0-4
5-9 10-14 15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 75+
Age Labor income
Consumption
Source: Mej´ıa-Guevara (2011). 6 / 50
Funding sources for persons 65 and older
Source: Mason and Lee (2011). 7 / 50
Income inequality It has the potential to undermine the economic prosperity of nations and their political stability (Stiglitz, 2012) - “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., 2010; Gasparini and Lustig, 2011) “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 / 50
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 65
50 60
Latin America 55
40
Africa Asia
50
30 45
Eastern Europe & Central Asia
40
20
Developed 35
10 30
25
0 1
2
3
4
5
Latin America
6
7
8
9
10
Rest of the world
Source: Gasparini (2004) based on Bourguignon and Morrison (2002).
20
Source: Gasparini et al. (2010).
9 / 50
Inequality in Latin America A map of inequality in Latin America Gini coefficient Distribution of household per capita income Around 2006
MEX RDO GUA
HND NIC
ELS
PAN
CRI
VEN COL
ECU
BRA
PER BOL PAR CHI ARG
< 46 53 - 54
Source: Gasparini et al. (2010).
46 - 48 54 - 56
48 - 50 56 - 58
URU
50 - 51 > 58
51 - 53 No data
10 / 50
BMV: Cencentration
Source: Perezcano (2011): http://www.capitalprivado.com.mx/2011/05/01/ 11 / 50
Good news?
Reduction of inequality in Latin America during the 2000s (Gasparini and Lustig, 2011)
Factors behind a decreased in inequality (Gasparini and Lustig, 2011). 1. Fall in the earnings gap of skilled/low-skilled workers, 2. Increase in government transfers targeted to the poor.
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Income Inequality in Mexico Inequality in Mexico Gini coefficient 1984-2006 using alternative income definitions
Source: Esquivel, Lustig and Scott (2010).
13 / 50
Progresa/Oportunidades and other subsidy programs 40,000 35,000
Million pesos (2005=100)
30,000 25,000 20,000 15,000 10,000 5,000 0 1994
1995
1996
1997
Other focalized subsidies
1998
1999
2000
Generalized subsidies
2001
2002
2003
2004
2005
Progresa-Oportunidades
Source: Own wint information from SHCP. 14 / 50
Methodology
15 / 50
Socioeconomic status (SES)
Stratum
Level of education
I
Non, kindergarten, or incomplete primary Primary, or incomplete lower secondary Lower secondary, or incomplete upper secondary Undergraduate, Master, or PhD
II III IV
Years of education (completed) [0, 6) [6, 9) [9, 16) 16 or more
16 / 50
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) .
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NTA by SES: Mexico 2004
18 / 50
Lifecycle deficit: Mexico 2004 2004
Relative to mean YL 30-49
1.2
.8
.4
0 0-4
5-9 10-14 15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 75+
Age Labor income
Consumption
Source: Mej´ıa-Guevara (2011). 19 / 50
Lifecycle deficit by SES: Mexico 2004 I
II 2.4
2
Relative to mean YL 30-49
Relative to mean YL 30-49
2.4
1.6
1.2
.8
.4
0
2
1.6
1.2
.8
.4
0 0-4
5-9 10-14 15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 75+
0-4
5-9 10-14 15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 75+
Age Labor income
Age Consumption
Labor income
III
IV
2.4
2.4
2
Relative to mean YL 30-49
Relative to mean YL 30-49
Consumption
1.6
1.2
.8
.4
0
2
1.6
1.2
.8
.4
0 0-4
5-9 10-14 15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 75+
0-4
5-9 10-14 15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 75+
Age Labor income
Age Consumption
Labor income
Consumption
* dashed lines represent national averages. Source: Own based on ENIGH 1994 and 2004. 20 / 50
Per capita age reallocations: Mexico 2004 National
Relative to mean YL 30-49
1
.5
0
-.5
-1 0-4
5-9 10-14 15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 75+
Age LCD
TG
TF
ABR
Source: Mej´ıa-Guevara (2011). 21 / 50
Per capita age reallocations by SES: Mexico 2004 II 3
2.5
2.5
Relative to mean YL 30-49
Relative to mean YL 30-49
I 3
2 1.5 1 .5 0 -.5 -1 -1.5
2 1.5 1 .5 0 -.5 -1 -1.5
-2
-2 0-4
5-9 10-14 15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 75+
0-4
5-9 10-14 15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 75+
Age LCD
TG
Age TF
ABR
LCD
TG
III
TF
ABR
IV
3 3
2.5
Relative to mean YL 30-49
Relative to mean YL 30-49
2.5 2 1.5 1 .5 0 -.5 -1
2 1.5 1 .5 0 -.5 -1 -1.5 -2
-1.5 -2 0-4
5-9 10-14 15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 75+
0-4
5-9 10-14 15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 75+
Age LCD
TG
Age TF
ABR
LCD
TG
TF
ABR
Source: Own based on ENIGH 1994 and 2004. 22 / 50
Funding sources for young and the elderly by SES: 2004 Stratum 2 100
90
90
80
80
70
70
60 50 40 30 40.7
20 10
46.1
45.9 35.0
30.7
11.4 0.0
0
% of total consumption
% of total consumption
Stratum 1 100
-12.4
-10
60 50 40
20 10 0
-20
-30
-30
0_19
26.2 8.8
0_19
TG
ABR
65+
YL
TF
90
80
80
70
70
60 50 83.2
75.4
30 20 10 0
9.5
5.0
18.4
18.4
1.9 -11.7
-10
TG
ABR
Stratum 4 100
90
% of total consumption
% of total consumption
Stratum 3 100
40
20.9
-18.1
65+ TF
26.6
0.5
-10
-20
YL
70.5
62.7
30
60 100.8
50
90.7
40 30 20 28.4
10 0
16.6 1.9
1.5
-0.1
-10 -34.8
-20
-20
-30
-30
0_19 YL
65+ TF
TG
0_19 ABR
YL
65+ TF
TG
ABR
Source: Own based on ENIGH 1994 and 2004. 23 / 50
NTA by SES: Mexico 1994 vs. 2004
24 / 50
Labor income by age: 1994 vs. 2004 Labor Income
Relative to mean YL 30-49
1
.8
.6
.4
.2
0 0-4
5-9 10-14 15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 75+
Age 1994
2004
Source: Own based on ENIGH 1994 and 2004. 25 / 50
Labor income by age and SES: 1994 vs. 2004
1994
2004 4.5
4.5
4
Relative to mean YL 30-49
Relative to mean YL 30-49
4 3.5 3 2.5 2 1.5 1
3.5 3 2.5 2 1.5 1 .5
.5 0
0 0-4
5-9 10-14 15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 75+
0-4
5-9 10-14 15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 75+
Age I
II
III
Age IV
National
I
II
III
IV
National
Source: Own based on ENIGH 1994 and 2004.
26 / 50
Total consumption by age: 1994 vs. 2004 Consumption
Relative to mean yl 30-49
1
.8
.6
.4
.2
0 0-4
5-9 10-14 15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 75+
Age 1994
2004
Source: Own based on ENIGH 1994 and 2004. 27 / 50
Education spending by age: 1994 vs. 2004 Private and public
Relative to mean yl 30-49
.2
.1
0 0-4
5-9 10-14 15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 75+
Age 1994
2004
Source: Own based on ENIGH 1994 and 2004. 28 / 50
Education spending by age and SES: 1994 vs. 2004
1994
2004 .8
Relative to mean yl 30-49
Relative to mean yl 30-49
.8
.6
.4
.2
0
.6
.4
.2
0 0-4
5-9 10-14 15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 75+
0-4
5-9 10-14 15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 75+
Age I
II
III
Age IV
National
I
II
III
IV
National
Source: Own based on ENIGH 1994 and 2004.
29 / 50
Education spending by SES: 1994 vs. 2004 Private and Public % of total consumption per stratum
15 14.3 13.1
10.7
10
10.8
10.6
8.2
8.3
8.2 7.6
5
5.1
0
1994 I
2004 II
III
IV
National
Source: Own based on ENIGH 1994 and 2004. 30 / 50
Education spending by SES: 1994 vs. 2004
Private
Public
12
12
9.7 8
6
6.3
6.2
5.4
5.0
4 3.9 2.6
2
2.6
% of total consumption per stratum
% of total consumption per stratum
11.9 10
10
8
6
6.5 5.7
5.3 4
4.3
4.3
4.6
4.6
2.5
2
2.6
1.7 1.2 0
1994 I
0
2004 II
III
IV
National
1994 I
2004 II
III
IV
National
Source: Own based on ENIGH 1994 and 2004.
31 / 50
Health spending by SES: 1994 vs. 2004 Private and Public % of total consumption per stratum
10
7.5
5.4
5 4.9
4.9 4.2
4.1
4.0 3.5 2.8
2.8
0
1994 I
2004 II
III
IV
National
Source: Own based on ENIGH 1994 and 2004. 32 / 50
Health spending by SES: 1994 vs. 2004
Private
Public 5
4
3 2.8 2.3
2
2.1
2.3 2.0 1.4
1 0.9
0
1.0
0.9
1994 I
1.0
III
IV
4.7 4.5 4
3.3
3
National
3.0
2.8 2.6
2.5
2 1.8 1.4 1 0.8 0
2004 II
% of total consumption per stratum
% of total consumption per stratum
5
1994 I
2004 II
III
IV
National
Source: Own based on ENIGH 1994 and 2004.
33 / 50
Lifecycle deficit: 1994 vs. 2004 Lifecycle deficit
Relative to mean yl 30-49
.8
.6
.4
.2
0
-.2 0-4
5-9 10-14 15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 75+
Age 1994
2004
Source: Own based on ENIGH 1994 and 2004. 34 / 50
Net public transfers: 1994 vs. 2004 Net public transfers
Relative to mean yl 30-49
.4
.2
0
-.2
-.4 0-4
5-9 10-14 15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 75+
Age 1994
2004
Source: Own based on ENIGH 1994 and 2004. 35 / 50
Net public transfers by age and SES: 1994 vs. 2004
1994
2004 .5
Relative to mean yl 30-49
Relative to mean yl 30-49
.5
0
-.5
-1
0
-.5
-1
-1.5 -1.5 0-4
5-9 10-14 15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 75+
0-4
5-9 10-14 15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 75+
Age I
II
III
Age IV
National
I
II
III
IV
National
Source: Own based on ENIGH 1994 and 2004.
36 / 50
Cash transfers: 1994 vs. 2004 Cash transfers % of total consumption per stratum
10 9.6
5 5.0 4.2
4.1
2.2
2.1
1.9
1.2 0.8
0
1994 I
0.2
II
2004 III
IV
National
Source: Own based on ENIGH 1994 and 2004. 37 / 50
Public pensions: 1994 vs. 2004 Pensions % of total consumption per stratum
2.5
2
2.1
1.7 1.5
1.6
1.6
1.5
1.5
1.4
1.4 1.2
1 0.9 .5
0
1994 I
2004 II
III
IV
National
Source: Own based on ENIGH 1994 and 2004. 38 / 50
Net private transfers by age: 1994 vs. 2004 Net private transfers 1
Relative to mean yl 30-49
.8 .6 .4 .2 0 -.2 -.4 -.6 -.8 -1 0-4
5-9 10-1415-1920-2425-2930-3435-3940-4445-4950-5455-5960-6465-69 75+
Age 1994
2004
Source: Own based on ENIGH 1994 and 2004. 39 / 50
Asset-based reallocations by age: 1994 vs. 2004 Asset-based reallocations
Relative to mean yl 30-49
1
.8
.6
.4
.2
0
0-4
5-9 10-14 15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 75+
Age 1994
2004
Source: Own based on ENIGH 1994 and 2004. 40 / 50
Funding sources for young and elderly: 1994 vs. 2004
2004 100
90
90
80
80
70
70
60 50 40
76.9 61.6
30 20 10
31.1 16.4
19.3
16.0
0
-9.4
-10
-12.0
% of total consumption
% of total consumption
1994 100
60 50 40
0
-30
-30
65+ TF
20.9
10 7.0
TG
27.2
26.4 1.9 -16.3
-10 -20
0_19
62.7
20
-20
YL
70.2
30
0_19 ABR
YL
65+ TF
TG
ABR
Source: Own based on ENIGH 1994 and 2004.
41 / 50
Conclusions
42 / 50
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 2004 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 / 50
Appendix
44 / 50
BMV: Cencentration
34.5% Foreign financial groups
42.2%
Grupo Carso and Affiliates Other
23.3%
Source: Perezcano (2011): http://www.capitalprivado.com.mx/2011/05/01/ 45 / 50
Total consumption by age and SES: 1994 vs. 2004
1994
2004 3
2.5
2.5
Relative to mean yl 30-49
Relative to mean yl 30-49
3
2
1.5
1
2
1.5
1
.5
.5
0
0 0-4
5-9 10-14 15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 75+
0-4
5-9 10-14 15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 75+
Age I
II
III
Age IV
National
I
II
III
IV
National
Source: Own based on ENIGH 1994 and 2004.
46 / 50
Lifecycle deficit by SES: 1994 vs. 2004
2004
Relative to mean yl 30-49
Relative to mean yl 30-49
1994
.5 0 -.5 -1
.5
0
-.5
-1
-1.5
-1.5 0-4
5-9 10-14 15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 75+
0-4
5-9 10-14 15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 75+
Age I
II
III
Age IV
National
I
II
III
IV
National
Source: Own based on ENIGH 1994 and 2004.
47 / 50
Net private transfers by age and SES: 1994 vs. 2004
2004
Relative to mean yl 30-49
Relative to mean yl 30-49
1994 3.5 3 2.5 2 1.5 1 .5 0 -.5 -1 -1.5 -2 -2.5 -3 -3.5 -4 -4.5 0-4
5-9 10-14 15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 75+
3.5 3 2.5 2 1.5 1 .5 0 -.5 -1 -1.5 -2 -2.5 -3 -3.5 -4 -4.5 0-4
5-9 10-14 15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 75+
Age I
II
III
Age IV
National
I
II
III
IV
National
Source: Own based on ENIGH 1994 and 2004.
48 / 50
Asset-based reallocations by age and SES: 1994 vs. 2004
2004 4.5
4
4
Relative to mean yl 30-49
Relative to mean yl 30-49
1994 4.5
3.5 3 2.5 2 1.5 1 .5
3.5 3 2.5 2 1.5 1 .5
0
0 0-4
5-9 10-14 15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 75+
0-4
5-9 10-14 15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 75+
Age I
II
III
Age IV
National
I
II
III
IV
National
Source: Own based on ENIGH 1994 and 2004.
49 / 50
Funding sources for young and the elderly by SES: 1994 Stratum 2 100
90
90
80
80
70
70
60 50 40 30 20
60.3
60.0 33.8
29.2
24.2
10
25.0
0 -12.7
-10
% of total consumption
% of total consumption
Stratum 1 100
-17.8
60 50 40
72.8
30
57.5
20 10
36.4 18.5
16.7
0
-8.1
-20
-30
-30
0_19 YL
65+ TF
0_19
TG
ABR
65+
YL
TF
Stratum 3 100
90
90
80
80
70
70
60 50 84.4
40
72.2
30 20 10
16.8
11.1
9.0
TG
ABR
Stratum 4
100
6.0
1.9
-4.7
% of total consumption
% of total consumption
-11.7
-10
-20
0
14.6
60 50
30
52.3
49.3
20 10 0
-10
-10
-20
-20
-30
93.2
40
6.0
1.3
-2.5
-1.9
-3.4
-30
0_19 YL
65+ TF
TG
0_19 ABR
YL
65+ TF
TG
ABR
Source: Own based on ENIGH 1994 and 1994. 50 / 50
