Mexico experienced a pronounced increase in the degree of inequality and earnings inequality over the 1980s and mid-1990s. Contrary to the trend in the distribution of total income inequality, there has been an improvement in the distribution of earnings inequality since 1996. This paper shows the following results. First, education has the highest gross contribution in explaining changes in earnings distribution. Second, both changes in the distribution of education and in the relative earnings among educational groups have always been in phase with the alterations in the earnings distribution. Specifically, when the income profile effect related to education became steeper and the inequality of education increased, the earnings distribution worsened (as in the 1988-1996 period). Third, changes in the relative earnings among educational groups are always the leading force behind changes in inequality.
Reviewing the factors and mechanisms that have been But the increase in earnings inequality in Mexico does driving inequality in earnings in Mexico, L6pez-Acevedo not appear to be the result of a worsening in the finds that inequality in education accounts for the largest distribution of education-although the income profile, share by far of the variation in earnings. In fact, the which is related to returns to schooling, has become contribution of educational inequality to earnings much steeper. This means that the shift in demand inequality in Mexico ranks second in size in Latin toward high-skilled labor has not been matched by an America, after that in Brazil, and its significance has been increase in supply. The probable reason: the increased increasing. Moreover, the income effect is always economic openness in Mexico has facilitated skill-biased prevalent, and the distribution of education is highly technological change. significant even after controlling for changes in other relevant variables, such as age, region, economic sector, and labor market status.
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