Rising Wage Inequality in Mexico, 1984-2000: A Distributional Analysis

Abstract

In this study we look at distribution of wages to examine the extent and cause of the increasing wage inequality in Mexico over the two decades encompassing 1984 and 2000. To understand the causes of the increase in inequality over time we do a counterfactual analysis. We find that over the last two decades not only did the inequality increase, there also was an erosion of real wages, and it is the middle class which was affected the most. The main reason for the decrease in real wages was declining unionization in the country, while the main reason for the rise in inequality was changing distribution of skills.