Inequality of Opportunity in Mexico

Abstract

Mexico is a country with high levels of inequality and low intergenerational
 social-mobility rates for those located at the bottom extremes of the wealth
 distribution. Although such low rates suggest that at least a share of the
 observed income inequality may be due to an unequal distribution of
 opportunities, this conjecture has not been thoroughly tested in the
 literature. The present article fills this gap estimating the lower bound of
 the contribution of unequal opportunities to income and wealth inequality
 in Mexico, with an operationalization of the “ex-ante” approach to the
 measurement of inequality of opportunity. Relying on a national
 representative survey designed for the analysis of social mobility, namely,
 the ESRU Survey on Social Mobility in Mexico (2011), we are able to define
 a broad set of circumstance groups (“types”), encompassing the wealth of
 the household of origin. This available information reduces the omitted
 variable bias of previous estimations and allows for a better account of the
 role of inequality of opportunity in income inequality. Our results show that
 the lower bound of the contribution of unequal opportunities to total
 income inequality and total wealth inequality is around 30 per cent, which
 is substantially higher than previous estimations for Mexico and ranks
 among the highest values in Latin America.