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Economic Inequality and Intergenerational Transfers: evidence from - - PowerPoint PPT Presentation

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Economic Inequality and Intergenerational Transfers: evidence from Mexico Iv an Mej a-Guevara imejiag@hsph.harvard.edu Harvard School of Public Health Ninth Meeting of the Working Group on Macroeconomic Aspects of Intergenerational

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SLIDE 1

Economic Inequality and Intergenerational Transfers: evidence from Mexico

Iv´ an Mej´ ıa-Guevara

imejiag@hsph.harvard.edu

Harvard School of Public Health

Ninth Meeting of the Working Group on Macroeconomic Aspects of Intergenerational Transfers, Barcelona June 3 2013

1 / 50

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SLIDE 2

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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SLIDE 3

Outline

Introduction Methodology NTA by SES: Mexico 2004 NTA by SES: Mexico 1994 vs. 2004 Conclusions Appendix

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SLIDE 4

Introduction

4 / 50

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SLIDE 5

Per capita labor income and consumption: 23 economies around 2000

Source: Tung (2011). 5 / 50

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SLIDE 6

Lifecycle deficit: Mexico 2004

.4 .8 1.2

Relative to mean YL 30-49

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

2004

Source: Mej´ ıa-Guevara (2011). 6 / 50

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SLIDE 7

Funding sources for persons 65 and older

Source: Mason and Lee (2011). 7 / 50

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SLIDE 8

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
  • pportunity 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

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SLIDE 9

Inequality in Latin America and the World

Inequality in Latin America and the world Share of deciles in income distribution

10 20 30 40 50 1 2 3 4 5 6 7 8 9 10 Latin America Rest of the world

Source: Gasparini (2004) based on Bourguignon and Morrison (2002).

Gini coefficients Countries around the world

20 25 30 35 40 45 50 55 60 65 Latin America Asia Developed Africa Eastern Europe & Central Asia

Source: Gasparini et al. (2010). 9 / 50

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SLIDE 10

Inequality in Latin America

A map of inequality in Latin America Gini coefficient Distribution of household per capita income

Around 2006

< 46 46 - 48 48 - 50 50 - 51 51 - 53 53 - 54 54 - 56 56 - 58 > 58 No data

ARG MEX RDO GUA BRA URU PAR BOL CHI PER ECU VEN PAN CRI NIC HND ELS COL

Source: Gasparini et al. (2010). 10 / 50

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SLIDE 11

BMV: Cencentration

Source: Perezcano (2011): http://www.capitalprivado.com.mx/2011/05/01/ 11 / 50

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SLIDE 12

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.

12 / 50

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SLIDE 13

Income Inequality in Mexico

Inequality in Mexico Gini coefficient 1984-2006 using alternative income definitions

  • Source: Esquivel, Lustig and Scott (2010).

13 / 50

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SLIDE 14

Progresa/Oportunidades and other subsidy programs

5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Million pesos (2005=100)

Other focalized subsidies Generalized subsidies Progresa-Oportunidades

Source: Own wint information from SHCP. 14 / 50

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SLIDE 15

Methodology

15 / 50

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Socioeconomic status (SES)

Stratum Level of education Years of education (completed) I Non, kindergarten, or incomplete primary [0, 6) II Primary, or incomplete lower secondary [6, 9) III Lower secondary, or incomplete upper secondary [9, 16) IV Undergraduate, Master,

  • r PhD

16 or more

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SLIDE 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) .

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SLIDE 18

NTA by SES: Mexico 2004

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Lifecycle deficit: Mexico 2004

.4 .8 1.2

Relative to mean YL 30-49

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

2004

Source: Mej´ ıa-Guevara (2011). 19 / 50

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SLIDE 20

Lifecycle deficit by SES: Mexico 2004

.4 .8 1.2 1.6 2 2.4

Relative to mean YL 30-49

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

I

.4 .8 1.2 1.6 2 2.4

Relative to mean YL 30-49

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

II

.4 .8 1.2 1.6 2 2.4

Relative to mean YL 30-49

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

III

.4 .8 1.2 1.6 2 2.4

Relative to mean YL 30-49

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

IV

* dashed lines represent national averages. Source: Own based on ENIGH 1994 and 2004. 20 / 50

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SLIDE 21

Per capita age reallocations: Mexico 2004

  • 1
  • .5

.5 1

Relative to mean YL 30-49

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

National

Source: Mej´ ıa-Guevara (2011). 21 / 50

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SLIDE 22

Per capita age reallocations by SES: Mexico 2004

  • 2
  • 1.5
  • 1
  • .5

.5 1 1.5 2 2.5 3

Relative to mean YL 30-49

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

I

  • 2
  • 1.5
  • 1
  • .5

.5 1 1.5 2 2.5 3

Relative to mean YL 30-49

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

II

  • 2
  • 1.5
  • 1
  • .5

.5 1 1.5 2 2.5 3

Relative to mean YL 30-49

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

III

  • 2
  • 1.5
  • 1
  • .5

.5 1 1.5 2 2.5 3

Relative to mean YL 30-49

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

IV

Source: Own based on ENIGH 1994 and 2004. 22 / 50

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SLIDE 23

Funding sources for young and the elderly by SES: 2004

11.4 40.7 45.9 0.0 30.7

  • 12.4

35.0 46.1

  • 30
  • 20
  • 10

10 20 30 40 50 60 70 80 90 100

% of total consumption 0_19 65+

Stratum 1

YL TF TG ABR

8.8 62.7 26.2 0.5 20.9

  • 18.1

26.6 70.5

  • 30
  • 20
  • 10

10 20 30 40 50 60 70 80 90 100

% of total consumption 0_19 65+

Stratum 2

YL TF TG ABR

5.0 83.2 9.5 1.9 18.4

  • 11.7

18.4 75.4

  • 30
  • 20
  • 10

10 20 30 40 50 60 70 80 90 100

% of total consumption 0_19 65+

Stratum 3

YL TF TG ABR

1.5 100.8 1.9

  • 0.1

28.4

  • 34.8

16.6 90.7

  • 30
  • 20
  • 10

10 20 30 40 50 60 70 80 90 100

% of total consumption 0_19 65+

Stratum 4

YL TF TG ABR

Source: Own based on ENIGH 1994 and 2004. 23 / 50

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SLIDE 24

NTA by SES: Mexico 1994 vs. 2004

24 / 50

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SLIDE 25

Labor income by age: 1994 vs. 2004

.2 .4 .6 .8 1

Relative to mean YL 30-49

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

Labor Income

Source: Own based on ENIGH 1994 and 2004. 25 / 50

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SLIDE 26

Labor income by age and SES: 1994 vs. 2004

.5 1 1.5 2 2.5 3 3.5 4 4.5

Relative to mean YL 30-49

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 IV National

1994

.5 1 1.5 2 2.5 3 3.5 4 4.5

Relative to mean YL 30-49

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 IV National

2004 Source: Own based on ENIGH 1994 and 2004. 26 / 50

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SLIDE 27

Total consumption by age: 1994 vs. 2004

.2 .4 .6 .8 1

Relative to mean yl 30-49

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

Consumption

Source: Own based on ENIGH 1994 and 2004. 27 / 50

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SLIDE 28

Education spending by age: 1994 vs. 2004

.1 .2

Relative to mean yl 30-49

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

Private and public

Source: Own based on ENIGH 1994 and 2004. 28 / 50

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SLIDE 29

Education spending by age and SES: 1994 vs. 2004

.2 .4 .6 .8

Relative to mean yl 30-49

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 IV National

1994

.2 .4 .6 .8

Relative to mean yl 30-49

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 IV National

2004 Source: Own based on ENIGH 1994 and 2004. 29 / 50

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SLIDE 30

Education spending by SES: 1994 vs. 2004

8.2 10.7 10.6 14.3 10.8 13.1 8.2 5.1 7.6 8.3 5 10 15

% of total consumption per stratum 1994 2004

Private and Public

I II III IV National

Source: Own based on ENIGH 1994 and 2004. 30 / 50

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SLIDE 31

Education spending by SES: 1994 vs. 2004

3.9 5.4 6.3 9.7 6.2 1.2 1.7 2.6 5.0 2.6 2 4 6 8 10 12

% of total consumption per stratum 1994 2004

Private

I II III IV National

4.3 5.3 4.3 4.6 4.6 11.9 6.5 2.5 2.6 5.7 2 4 6 8 10 12

% of total consumption per stratum 1994 2004

Public

I II III IV National

Source: Own based on ENIGH 1994 and 2004. 31 / 50

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SLIDE 32

Health spending by SES: 1994 vs. 2004

7.5 4.9 4.1 2.8 4.9 5.4 4.2 3.5 2.8 4.0 5 10

% of total consumption per stratum 1994 2004

Private and Public

I II III IV National

Source: Own based on ENIGH 1994 and 2004. 32 / 50

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SLIDE 33

Health spending by SES: 1994 vs. 2004

2.8 2.1 2.3 2.0 2.3 0.9 0.9 1.0 1.4 1.0 1 2 3 4 5

% of total consumption per stratum 1994 2004

Private

I II III IV National

4.7 2.8 1.8 0.8 2.6 4.5 3.3 2.5 1.4 3.0 1 2 3 4 5

% of total consumption per stratum 1994 2004

Public

I II III IV National

Source: Own based on ENIGH 1994 and 2004. 33 / 50

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SLIDE 34

Lifecycle deficit: 1994 vs. 2004

  • .2

.2 .4 .6 .8

Relative to mean yl 30-49

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

Lifecycle deficit

Source: Own based on ENIGH 1994 and 2004. 34 / 50

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SLIDE 35

Net public transfers: 1994 vs. 2004

  • .4
  • .2

.2 .4

Relative to mean yl 30-49

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

Net public transfers

Source: Own based on ENIGH 1994 and 2004. 35 / 50

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SLIDE 36

Net public transfers by age and SES: 1994 vs. 2004

  • 1.5
  • 1
  • .5

.5

Relative to mean yl 30-49

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 IV National

1994

  • 1.5
  • 1
  • .5

.5

Relative to mean yl 30-49

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 IV National

2004 Source: Own based on ENIGH 1994 and 2004. 36 / 50

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SLIDE 37

Cash transfers: 1994 vs. 2004

5.0 2.1 1.2 0.2 2.2 9.6 4.2 1.9 0.8 4.1 5 10

% of total consumption per stratum 1994 2004

Cash transfers

I II III IV National

Source: Own based on ENIGH 1994 and 2004. 37 / 50

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SLIDE 38

Public pensions: 1994 vs. 2004

1.5 1.7 1.6 0.9 1.4 1.2 1.6 1.4 2.1 1.5 .5 1 1.5 2 2.5

% of total consumption per stratum 1994 2004

Pensions

I II III IV National

Source: Own based on ENIGH 1994 and 2004. 38 / 50

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SLIDE 39

Net private transfers by age: 1994 vs. 2004

  • 1
  • .8
  • .6
  • .4
  • .2

.2 .4 .6 .8 1

Relative to mean yl 30-49

0-4 5-9 10-1415-1920-2425-2930-3435-3940-4445-4950-5455-5960-6465-69 75+

Age 1994 2004

Net private transfers

Source: Own based on ENIGH 1994 and 2004. 39 / 50

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SLIDE 40

Asset-based reallocations by age: 1994 vs. 2004

.2 .4 .6 .8 1

Relative to mean yl 30-49

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

Asset-based reallocations

Source: Own based on ENIGH 1994 and 2004. 40 / 50

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SLIDE 41

Funding sources for young and elderly: 1994 vs. 2004

16.4 76.9 16.0

  • 9.4

31.1

  • 12.0

19.3 61.6

  • 30
  • 20
  • 10

10 20 30 40 50 60 70 80 90 100

% of total consumption 0_19 65+

1994

YL TF TG ABR

7.0 70.2 20.9 1.9 26.4

  • 16.3

27.2 62.7

  • 30
  • 20
  • 10

10 20 30 40 50 60 70 80 90 100

% of total consumption 0_19 65+

2004

YL TF TG ABR

Source: Own based on ENIGH 1994 and 2004. 41 / 50

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SLIDE 42

Conclusions

42 / 50

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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

  • ne decade later.

43 / 50

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SLIDE 44

Appendix

44 / 50

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SLIDE 45

BMV: Cencentration

34.5% 23.3% 42.2% Foreign financial groups Grupo Carso and Affiliates Other

Source: Perezcano (2011): http://www.capitalprivado.com.mx/2011/05/01/ 45 / 50

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SLIDE 46

Total consumption by age and SES: 1994 vs. 2004

.5 1 1.5 2 2.5 3

Relative to mean yl 30-49

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 IV National

1994

.5 1 1.5 2 2.5 3

Relative to mean yl 30-49

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 IV National

2004 Source: Own based on ENIGH 1994 and 2004. 46 / 50

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SLIDE 47

Lifecycle deficit by SES: 1994 vs. 2004

  • 1.5
  • 1
  • .5

.5

Relative to mean yl 30-49

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 IV National

1994

  • 1.5
  • 1
  • .5

.5

Relative to mean yl 30-49

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 IV National

2004 Source: Own based on ENIGH 1994 and 2004. 47 / 50

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SLIDE 48

Net private transfers by age and SES: 1994 vs. 2004

  • 4.5
  • 4
  • 3.5
  • 3
  • 2.5
  • 2
  • 1.5
  • 1
  • .5

.5 1 1.5 2 2.5 3 3.5

Relative to mean yl 30-49

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 IV National

1994

  • 4.5
  • 4
  • 3.5
  • 3
  • 2.5
  • 2
  • 1.5
  • 1
  • .5

.5 1 1.5 2 2.5 3 3.5

Relative to mean yl 30-49

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 IV National

2004 Source: Own based on ENIGH 1994 and 2004. 48 / 50

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SLIDE 49

Asset-based reallocations by age and SES: 1994 vs. 2004

.5 1 1.5 2 2.5 3 3.5 4 4.5

Relative to mean yl 30-49

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 IV National

1994

.5 1 1.5 2 2.5 3 3.5 4 4.5

Relative to mean yl 30-49

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 IV National

2004 Source: Own based on ENIGH 1994 and 2004. 49 / 50

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SLIDE 50

Funding sources for young and the elderly by SES: 1994

33.8 60.0 24.2

  • 12.7

29.2

  • 17.8

25.0 60.3

  • 30
  • 20
  • 10

10 20 30 40 50 60 70 80 90 100

% of total consumption 0_19 65+

Stratum 1

YL TF TG ABR

18.5 72.8 16.7

  • 8.1

36.4

  • 11.7

14.6 57.5

  • 30
  • 20
  • 10

10 20 30 40 50 60 70 80 90 100

% of total consumption 0_19 65+

Stratum 2

YL TF TG ABR

9.0 84.4 11.1

  • 4.7

16.8 1.9 6.0 72.2

  • 30
  • 20
  • 10

10 20 30 40 50 60 70 80 90 100

% of total consumption 0_19 65+

Stratum 3

YL TF TG ABR

1.3 93.2 6.0

  • 2.5

49.3

  • 1.9
  • 3.4

52.3

  • 30
  • 20
  • 10

10 20 30 40 50 60 70 80 90 100

% of total consumption 0_19 65+

Stratum 4

YL TF TG ABR

Source: Own based on ENIGH 1994 and 1994. 50 / 50