## wpiea2019148 - 6.5 million households were receiving benefits fromProsperain 2017 (CONEVAL, 2018)

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### Coverage and program descriptions
- Prospera
  - 6.5 million households were receiving benefits from Prospera in 2017 (CONEVAL, 2018).
- Programa Pensión para Adultos Mayores (non-contributory pension for older adults)
  - Began in 2007 as Programa 70 y Más (rural, age 70+); expanded nationally in 2012 to all adults above 70 not receiving a retirement or disability pension greater than a certain limit; minimum eligibility age reduced to 65 in 2013.
  - About 5.1 million people were receiving a pension from the program in 2017.
- Proagro (formerly Procampo → Procampo Productivo → Proagro Productivo)
  - Origins in 1993 to assist transition under NAFTA from guaranteed prices to market-oriented policies.
  - Under Proagro, beneficiaries must commit subsidies to inputs, machines, training, technical assistance, insurance or price coverage, among other things.
  - About 1.5 million people benefit from the program.
- Government scholarships
  - Administered by the Ministry of Public Education (National Scholarship Program) for primary, secondary and tertiary education; CONACYT for postgraduate studies.
  - Scholarships are granted based on social, economic, or academic criteria.
  - About 1.8 million recipients of National Scholarship Program scholarships and 61,384 postgraduate scholars in 2017 (CONEVAL, 2018).
- Non-monetary medical transfers
  - Provided through social security institutions or Seguro Popular (created in 2003 to provide universal medical insurance for those not covered by social security).
  - Social security institutions include IMSS, ISSSTE, and special schemes for Pemex, ISSFAM, and the navy; each scheme has its own network of healthcare providers.

### Fiscal and budgetary context
- In 2016, the five programs above:
  - Accounted for roughly half of the total budget for federal social development programs reported by CONEVAL (CONEVAL, 2016).
  - Represented between 2 and 2 1/2 percent of GDP, depending on the way non-monetary medical transfers are computed.
- After a modest increase over 2007-2015, total public social spending as a share of GDP fell between 2015 and 2017 due to a fiscal consolidation effort; Mexico’s public social spending is much lower than in other OECD countries (OECD, 2017).

### Redistribution, targeting, and effectiveness
- Redistributive effects (2016)
  - Without Prospera and non-contributory pensions:
    - Poverty index would be 2.3 percentage points higher, increasing from 18.7 to 21 percent.
    - Gini coefficient would increase from 44.9 to 46.2.
  - Prospera and the non-contributory pension program are well targeted and progressive in absolute terms: poorer households are covered better and receive higher transfer amounts than richer households.
- Comparative effectiveness
  - Prospera, the non-contributory pension program for elderly adults, and Proagro are ten times more effective at reducing income inequality than government scholarships and government transfers subsidizing healthcare consumption.
- Progressivity patterns across programs
  - Prospera and non-contributory pensions: progressive in absolute terms (favor poorer households).
  - Proagro: subsidies are highest for the poorest and richest households and lower for middle-income households.
  - Government scholarships and medical non-monetary transfers: consistently higher for richer households; progressive only in relative terms (transfers increase with income but represent a smaller portion of richer households’ net market income).
- Policy implication from results
  - There is scope for better targeting of existing social programs, notably government scholarships and non-monetary transfers for medical expenses.

### Data and methodology notes
- Data source: National Survey of Household Income and Expenditure (ENIGH) by INEGI.
  - 2016 survey sample: 81,515 housing units (“vivienda”) and 82,718 households, out of which 70,311 completed the survey.
  - Income amounts are quarterly unless stated otherwise.
  - Income categories constructed consistent across years: wage and salary income, self-employment income, capital income, transfer income, and other income.
  - Non-monetary income treatment:
    - Used “apoyo” for 2008 and 2010.
    - Used “gasto” for years before 2008.
    - Used “gasto no monetario” for years after 2010.
  - Government transfers constructed by combining income and expenditure data; medical non-monetary transfers identified from household expenditure entries with institution = federal, state, or municipal government.
- Outlier treatment: dropped observations with total income greater or equal to 25 times the 99th percentile each year (two such observations in 2016; none in other years).
- Employment/formality classification: changed across survey waves; formal employee definitions differ for 2004-2006 and 2016 vs. 2008-2014.

### Key findings on inequality and poverty trends
- International and temporal comparisons
  - Gini coefficient in Mexico: 0.45 (2016).
  - OECD average Gini: 0.37.
  - Mexico’s Gini decreased from 0.47 in 2004 to 0.45 in 2016.
- Income concentration
  - In Mexico, the richest 20% households have an income ten times higher than the poorest 20%.
  - In an average OECD country, the top 20% have about five times the income of the bottom 20%.
- Growth by decile (2004-2016, average annual)
  - Poorest decile: average real income growth of 1.14% per year.
  - Middle two deciles: 0.59% per year.
  - Richest decile: average real income decreased by 0.3% per year.
- Geography and education decomposition
  - Theil index decomposition: inequality within states accounts for the bulk of overall inequality; inequality between states is less than 10 percent of total inequality.
  - Inequality between education levels accounts for around 20 percent of total inequality (its share decreased between 2004 and 2016).
- Sources of inequality (2016)
  - Labor income Gini: 0.54 in 2016 (0.53 in 2004).
  - Capital income increased income inequality; public and private transfers reduced it.
  - Government monetary transfers’ reduction in the Gini coefficient doubled from 0.01 in 2004 to 0.02 in 2016.
  - Labor income inequality is higher in rural areas than urban areas; however, public and private transfers reduce rural inequality more, leading to only a marginally higher Gini in urban areas.
- Shapley decomposition (change in Gini, 2004–2016)
  - Labor income and contributory pensions increased the Gini coefficient by 0.001.
  - Capital income decreased the Gini coefficient by 0.014.
  - Other income decreased the Gini coefficient by 0.002.
  - Other transfers decreased the Gini coefficient by 0.006.
  - Government monetary transfers contributed to a reduction in the Gini coefficient by 0.004.
- Shapley decomposition (change in poverty, 2004–2016)
  - Labor income increased poverty by 1.96 percentage points.
  - Capital income increased poverty by 0.38 percentage points.
  - Other income decreased poverty by 1.86 percentage points.
  - Contributory pensions decreased poverty by 0.88 percentage points.
  - Other transfers decreased poverty by 0.99 percentage points.
  - Government monetary transfers account for more than half of the overall reduction in poverty: 1.59 percentage points.

### Coverage and distribution of key programs (2016)
- 31 percent of the households in the bottom income quintile benefit from Prospera; 6 percent in the fifth quintile.
- Non-contributory pension program coverage is three times higher in the first income quintile than in the fifth quintile.
- Prospera and non-contributory pensions: the average amount received decreases with household income.
- Proagro:
  - Benefits a greater share of households in the bottom income quintile than in any other quintile.
  - The average amount received by households in the top quintile is only marginally lower than the average transfer amount to households in the bottom quintile and higher than in the middle three quintiles.
- Government scholarships: both coverage and amount rise with household income.
  - Even within the top quintile, the government scholarship amount increases with income: households in the top fifth percentile receive 450 pesos per quarter on average while those in the top first percentile receive 856 pesos.
- Non-monetary government transfers covering medical expenses:
  - Benefit the same proportion of households in all five income quintiles.
  - Transfer amount increases with income.
- Other transfer programs are either not separately identified in ENIGH data or much smaller in size than the five considered.

### Household characteristics associated with receipt and amounts (2016, regression summaries)
- General pattern: indigenous, less educated households in rural and Southern regions or households with more members are more likely to receive a government transfer and, on average, receive a larger amount.
- Indigenous head:
  - Higher probability to receive transfers from Prospera, Proagro, and medical transfers.
  - Lower probability to receive a government scholarship.
  - Associated with lower transfer amounts from Proagro and medical transfers.
- Household composition:
  - Single-adult households: less likely to receive Prospera, non-contributory pension, Proagro, or medical transfers.
  - Households with more than three adults: greater chance of receiving all five benefits; higher Prospera amounts (Table 2: 3+ adults → Prospera 221.9***).
  - Number of children increases probability of receiving scholarships, medical transfers, and Prospera.
- Education of household head:
  - More educated head: higher chance of getting a government scholarship but lower chances of getting other benefits.
  - Tertiary education associated with lower probability of receiving Prospera, NC pension, Proagro, and medical transfers (Table 1 coefficients: tertiary education -1.892***, -1.051***, -1.403***, -0.496*** for respective programs).
- Geography:
  - Rural households have higher chances of receiving Prospera, non-contributory pensions, and Proagro.
  - Southern region and rural location associated with higher probabilities for several transfers.
- Selected regression magnitudes (2016):
  - Table 1 (logit probability coefficients): indigenous 0.557*** for Prospera; rural 1.297*** for Prospera; 5th income quintile -1.606*** for Prospera.
  - Table 2 (OLS amounts, pesos): Prospera constant 621.0***; indigenous → Prospera 198.6***; rural → Prospera 553.5***; 5th income quintile → Prospera -249.2***.
  - R-squared values for amount regressions: Prospera 0.201, NC pension 0.387, Proagro 0.011, Scholarship 0.005, Medical 0.002.
- Note on methods
  - Coverage is calculated at the household level.
  - Regressions use households with at least one adult; benchmark household: two adults, two children, no one over 65, urban Southern state, non-indigenous head with primary education only.

### Progressivity
- Definitions and interpretation
  - Absolute progressivity: absolute amount of a transfer decreases with income; concentration curve lies everywhere above the 45-degree line → negative concentration coefficient.
  - Relative progressivity: ratio of transfer to pre-transfer income declines with income; concentration curve lies everywhere above the net market income Lorenz curve.
  - Kakwani index = Gini(NMI) − concentration coefficient. Positive Kakwani necessary for relative progressivity; Kakwani larger than NMI Gini necessary (but not sufficient) for absolute progressivity.
- Empirical findings (2004 and 2016)
  - All transfers were everywhere progressive in relative terms in both 2004 and 2016.
  - Absolute progressivity:
    - Prospera (Oportunidades): everywhere progressive in absolute terms in both 2004 and 2016.
    - Proagro: progressive in absolute terms only in 2004.
    - Non-contributory pensions: progressive in absolute terms in 2016 (no 2004 data available).
- Kakwani indices (Table 3)
  - 2004: Prospera 0.909; Proagro 0.780; Scholarships 0.327; Memo NMI Gini 0.481. (NC pensions and Medical n/a)
  - 2016: Prospera 0.803; NC pensions 0.765; Proagro 0.702; Scholarships 0.279; Medical transfers 0.296; Memo NMI Gini 0.467.
- Overall Kakwani indices for transfers are positive in both years; indices are lower in 2016 than 2004, suggesting possible erosion in progressivity despite average benefit amounts increasing.

### Inequality of Opportunity
- Measure and focus
  - Opportunity index: share of income inequality explained by a circumstances set (here: state and size of locality), using mean log deviation on smoothed income distribution.
  - Higher index → larger inequality of opportunity.
- Main results (Table 4)
  - Net Market Income (NMI) opportunity index:
    - 2004: 20.9%
    - 2016: 16.5%
  - NMI + Prospera:
    - 2004: 20.6%
    - 2016: 15.9%
  - NMI + Non-Contributory Pensions:
    - 2004: n/a
    - 2016: 17.0%
  - NMI + Proagro:
    - 2004: 20.3%
    - 2016: 16.5%
  - NMI + Scholarships:
    - 2004: 20.9%
    - 2016: 16.6%
  - NMI + Medical Transfers:
    - 2004: n/a
    - 2016: 16.6%
  - Total Income After Transfers:
    - 2004: 20.1%
    - 2016: 16.2%
- Takeaways
  - Inequality of opportunity based on geography fell for both NMI and total income after transfers between 2004 and 2016.
  - Government transfers reduced inequality of opportunity: the proportion of inequality explained by geography decreased from NMI to total income after transfers in both years.
  - Program-level effects:
    - 2004: Proagro reduced the opportunity index by 0.6 percentage points; Prospera reduced it by 0.3 percentage points; scholarships had no effect.
    - 2016: Prospera reduced the opportunity index by 0.6 percentage points; Proagro did not affect the index.
    - Non-contributory pensions, scholarships, and medical non-monetary transfers increased the opportunity index in 2016.
  - Overall, the opportunity index remains lower after transfers.

### Effectiveness
- Definition
  - Effectiveness indicator (Lustig and Higgins, 2013): (Gini without transfer − Gini with transfer) divided by transfer size as percent of GDP. Also computed analogously for the poverty index.
- Aggregate amounts and shares (2016, Table 5)
  - Total transfer amount (billions of pesos per quarter):
    - Prospera 15.47
    - NC pensions 8.44
    - Proagro 2.07
    - Scholarships 3.46
    - Medical 9.35
    - All transfers 48.50
  - Mean share of total income (%):
    - Prospera 2.8
    - NC pensions 1.7
    - Proagro 0.3
    - Scholarships 0.2
    - Medical 0.6
    - All transfers 6.8
- Effectiveness indicators (2016, Table 5)
  - Effectiveness (Gini reduction per transfer size):
    - Prospera 2.67
    - NC pensions 2.50
    - Proagro 2.14
    - Scholarships 0.24
    - Medical 0.17
    - All transfers 1.74
  - Effectiveness (poverty reduction per transfer size):
    - Prospera 5.14
    - NC pensions 4.46
    - Proagro 4.56
    - Scholarships 1.32
    - Medical 1.58
    - All transfers 3.64
- Interpretation and counterfactuals
  - Prospera has the highest effectiveness in reducing inequality, followed by NC pensions and Proagro; scholarships and medical transfers have effectiveness about ten times smaller than the first three.
  - Prospera and NC pensions represent about half of the total government transfers received by an average household but account for 73 percent of the decline in the Gini coefficient from transfers and two thirds of the decline in the poverty index from transfers.
  - Hypothetical reallocation: The Gini coefficient and poverty index could theoretically drop by 2.6 percent and 5.6 percent respectively if amounts currently allocated to Proagro, scholarships, and medical transfers were distributed as progressively as Prospera and NC pensions (illustrative, mathematical exercise).
- Notes
  - The five separately identified transfers do not sum to “All transfers” because other small transfers exist; identified five represent more than 80 percent of total reported transfers.
  - Poverty cutoff used: 50 percent of the median total household income.

### Government scholarships and medical transfers
- Government scholarships: coverage and regressions to progressivity
  - Enrollment and scholarships by education level (2016, Figure 11):
    - Primary education:
      - Enrollment even across income quintiles.
      - Average scholarship amount increases with income.
      - Primary scholarship amounts are substantially lower than for other levels, limiting overall progressivity.
    - Secondary education:
      - Both enrollment and probability of receiving a government scholarship increase with income.
      - Scholarship amount roughly even across quintiles.
    - Tertiary education:
      - Enrollment increases with income.
      - Probability of receiving a government scholarship conditional on enrollment decreases with income.
      - Average scholarship amount conditional on receipt increases sharply with income (consistent with merit-based scholarships and attendance at more expensive institutions by wealthier students).
  - Net effects: children from poor households are less likely to enroll in secondary or tertiary education, less likely to receive scholarships for secondary education, and tend to receive smaller scholarships for tertiary education → contributes to scholarships being less progressive.
- Medical non-monetary transfers: distribution and potential causes
  - Transfer amounts by quintile (2016):
    - Bottom quintile: about 50 pesos per quarter.
    - Top quintile: about 800 pesos per quarter.
  - Total medical spending (government transfers + out-of-pocket, per quarter):
    - Bottom quintile: about 500 pesos.
    - Top quintile: a little more than 3500 pesos.
  - Share of expenses covered by government transfers increases with income → indicates room to improve progressivity.
  - Urban/rural and North/South patterns:
    - Rural households receive more medical subsidies than urban counterparts, especially for households at the top of the income distribution.
    - Southern households receive higher medical transfers than Northern households in the top three quintiles.
    - These patterns contradict the hypothesis that lower-income households receive fewer subsidies due to poorer access in rural/Southern regions.
    - One possible explanation: healthcare facilities associated with Seguro Popular may be scarcer in rural and Southern areas.

### Conclusion
- Government transfers in Mexico have played a key role in alleviating poverty, containing income inequalities, and reducing inequality of opportunity.
- All transfers analyzed are progressive in relative terms.
- Prospera and the non-contributory pension program for elderly adults are the most effective programs at reducing inequality because they target households at the bottom of the income distribution.
- Government scholarships and non-monetary medical transfers increase with income, possibly reflecting differences in access to tertiary education and medical services.
- The analysis does not capture dynamic effects:
  - Tertiary-education transfers that disproportionately benefit wealthier students may aggravate future inequality.
  - Non-contributory pensions, while reducing old-age poverty short-term, could discourage formal employment and pension contributions long-term.
- Dynamic effects of social policies are left for future research.

*Source: Excerpt from the IMF working paper (ENIGH-based analysis; program incidence and inequality results as reported).*

### 6.5 million households were receiving benefits fromProsperain 2017 (CONEVAL, 2018).

### wpiea2019148 - 6.5 million households were receiving benefits fromProsperain 2017 (CONEVAL, 2018)

### Coverage and program descriptions
- Prospera
  - 6.5 million households were receiving benefits from Prospera in 2017 (CONEVAL, 2018).
- Programa Pensión para Adultos Mayores (non-contributory pension for older adults)
  - Began in 2007 as Programa 70 y Más (rural, age 70+); expanded nationally in 2012 to all adults above 70 not receiving a retirement or disability pension greater than a certain limit; minimum eligibility age reduced to 65 in 2013.
  - About 5.1 million people were receiving a pension from the program in 2017.
- Proagro (formerly Procampo → Procampo Productivo → Proagro Productivo)
  - Origins in 1993 to assist transition under NAFTA from guaranteed prices to market-oriented policies.
  - Under Proagro, beneficiaries must commit subsidies to inputs, machines, training, technical assistance, insurance or price coverage, among other things.
  - About 1.5 million people benefit from the program.
- Government scholarships
  - Administered by the Ministry of Public Education (National Scholarship Program) for primary, secondary and tertiary education; CONACYT for postgraduate studies.
  - Scholarships are granted based on social, economic, or academic criteria.
  - About 1.8 million recipients of National Scholarship Program scholarships and 61,384 postgraduate scholars in 2017 (CONEVAL, 2018).
- Non-monetary medical transfers
  - Provided through social security institutions or Seguro Popular (created in 2003 to provide universal medical insurance for those not covered by social security).
  - Social security institutions include IMSS, ISSSTE, and special schemes for Pemex, ISSFAM, and the navy; each scheme has its own network of healthcare providers.

### Fiscal and budgetary context
- In 2016, the five programs above:
  - Accounted for roughly half of the total budget for federal social development programs reported by CONEVAL (CONEVAL, 2016).
  - Represented between 2 and 2 1/2 percent of GDP, depending on the way non-monetary medical transfers are computed.
- After a modest increase over 2007-2015, total public social spending as a share of GDP fell between 2015 and 2017 due to a fiscal consolidation effort; Mexico’s public social spending is much lower than in other OECD countries (OECD, 2017).

### Redistribution, targeting, and effectiveness
- Redistributive effects (2016)
  - Without Prospera and non-contributory pensions:
    - Poverty index would be 2.3 percentage points higher, increasing from 18.7 to 21 percent.
    - Gini coefficient would increase from 44.9 to 46.2.
  - Prospera and the non-contributory pension program are well targeted and progressive in absolute terms: poorer households are covered better and receive higher transfer amounts than richer households.
- Comparative effectiveness
  - Prospera, the non-contributory pension program for elderly adults, and Proagro are ten times more effective at reducing income inequality than government scholarships and government transfers subsidizing healthcare consumption.
- Progressivity patterns across programs
  - Prospera and non-contributory pensions: progressive in absolute terms (favor poorer households).
  - Proagro: subsidies are highest for the poorest and richest households and lower for middle-income households.
  - Government scholarships and medical non-monetary transfers: consistently higher for richer households; progressive only in relative terms (transfers increase with income but represent a smaller portion of richer households’ net market income).
- Policy implication from results
  - There is scope for better targeting of existing social programs, notably government scholarships and non-monetary transfers for medical expenses.

### Data and methodology notes
- Data source: National Survey of Household Income and Expenditure (ENIGH) by INEGI.
  - 2016 survey sample: 81,515 housing units (“vivienda”) and 82,718 households, out of which 70,311 completed the survey.
  - Income amounts are quarterly unless stated otherwise.
  - Income categories constructed consistent across years: wage and salary income, self-employment income, capital income, transfer income, and other income.
  - Non-monetary income treatment:
    - Used “apoyo” for 2008 and 2010.
    - Used “gasto” for years before 2008.
    - Used “gasto no monetario” for years after 2010.
  - Government transfers constructed by combining income and expenditure data; medical non-monetary transfers identified from household expenditure entries with institution = federal, state, or municipal government.
- Outlier treatment: dropped observations with total income greater or equal to 25 times the 99th percentile each year (two such observations in 2016; none in other years).
- Employment/formality classification: changed across survey waves; formal employee definitions differ for 2004-2006 and 2016 vs. 2008-2014.

### Key findings on inequality and poverty trends
- International and temporal comparisons
  - Gini coefficient in Mexico: 0.45 (2016).
  - OECD average Gini: 0.37.
  - Mexico’s Gini decreased from 0.47 in 2004 to 0.45 in 2016.
- Income concentration
  - In Mexico, the richest 20% households have an income ten times higher than the poorest 20%.
  - In an average OECD country, the top 20% have about five times the income of the bottom 20%.
- Growth by decile (2004-2016, average annual)
  - Poorest decile: average real income growth of 1.14% per year.
  - Middle two deciles: 0.59% per year.
  - Richest decile: average real income decreased by 0.3% per year.
- Geography and education decomposition
  - Theil index decomposition: inequality within states accounts for the bulk of overall inequality; inequality between states is less than 10 percent of total inequality.
  - Inequality between education levels accounts for around 20 percent of total inequality (its share decreased between 2004 and 2016).
- Sources of inequality (2016)
  - Labor income Gini: 0.54 in 2016 (0.53 in 2004).
  - Capital income increased income inequality; public and private transfers reduced it.
  - Government monetary transfers’ reduction in the Gini coefficient doubled from 0.01 in 2004 to 0.02 in 2016.
  - Labor income inequality is higher in rural areas than urban areas; however, public and private transfers reduce rural inequality more, leading to only a marginally higher Gini in urban areas.
- Shapley decomposition (change in Gini, 2004–2016)
  - Labor income and contributory pensions increased the Gini coefficient by 0.001.
  - Capital income decreased the Gini coefficient by 0.014.
  - Other income decreased the Gini coefficient by 0.002.
  - Other transfers decreased the Gini coefficient by 0.006.
  - Government monetary transfers contributed to a reduction in the Gini coefficient by 0.004.
- Shapley decomposition (change in poverty, 2004–2016)
  - Labor income increased poverty by 1.96 percentage points.
  - Capital income increased poverty by 0.38 percentage points.
  - Other income decreased poverty by 1.86 percentage points.
  - Contributory pensions decreased poverty by 0.88 percentage points.
  - Other transfers decreased poverty by 0.99 percentage points.
  - Government monetary transfers account for more than half of the overall reduction in poverty: 1.59 percentage points.

### Additional methodological caveats and consistency with literature
- ENIGH limitations
  - Changes in reporting of government transfers, education, and employment industries over time complicate comparisons; analysis focuses on the period after 2004.
  - Under-reporting of capital income in ENIGH and possible worsening over time may affect results.
  - Absence of tax data in ENIGH prevents inclusion of taxes and indirect subsidies (e.g., on gasoline) in the analysis.
- Literature alignment
  - Results confirm earlier findings by Scott (2014) and Scott et al. (2017) and are consistent with positive assessments of Progresa/Oportunidades (Parker and Todd, 2017; Parker and Vogl, 2018).

*Source: Excerpt from the IMF working paper (ENIGH-based analysis; program incidence and inequality results as reported).*

### 4.1    Coverage

### 4.1    Coverage

### Coverage and distribution of key programs (2016)
- 31 percent of the households in the bottom income quintile benefit from Prospera; 6 percent in the fifth quintile.
- Non-contributory pension program coverage is three times higher in the first income quintile than in the fifth quintile.
- Prospera and non-contributory pensions: the average amount received decreases with household income.
- Proagro:
  - Benefits a greater share of households in the bottom income quintile than in any other quintile.
  - The average amount received by households in the top quintile is only marginally lower than the average transfer amount to households in the bottom quintile and higher than in the middle three quintiles.
- Government scholarships: both coverage and amount rise with household income.
  - Even within the top quintile, the government scholarship amount increases with income: households in the top fifth percentile receive 450 pesos per quarter on average while those in the top first percentile receive 856 pesos.
- Non-monetary government transfers covering medical expenses:
  - Benefit the same proportion of households in all five income quintiles.
  - Transfer amount increases with income.
- Other transfer programs are either not separately identified in ENIGH data or much smaller in size than the five considered.

### Household characteristics associated with receipt and amounts (2016, regression summaries)
- General pattern: indigenous, less educated households in rural and Southern regions or households with more members are more likely to receive a government transfer and, on average, receive a larger amount.
- Indigenous head:
  - Higher probability to receive transfers from Prospera, Proagro, and medical transfers.
  - Lower probability to receive a government scholarship.
  - Associated with lower transfer amounts from Proagro and medical transfers.
- Household composition:
  - Single-adult households: less likely to receive Prospera, non-contributory pension, Proagro, or medical transfers.
  - Households with more than three adults: greater chance of receiving all five benefits; higher Prospera amounts (Table 2: 3+ adults → Prospera 221.9***).
  - Number of children increases probability of receiving scholarships, medical transfers, and Prospera.
- Education of household head:
  - More educated head: higher chance of getting a government scholarship but lower chances of getting other benefits.
  - Tertiary education associated with lower probability of receiving Prospera, NC pension, Proagro, and medical transfers (Table 1 coefficients: tertiary education -1.892***, -1.051***, -1.403***, -0.496*** for respective programs).
- Geography:
  - Rural households have higher chances of receiving Prospera, non-contributory pensions, and Proagro.
  - Southern region and rural location associated with higher probabilities for several transfers.
- Selected regression magnitudes (2016):
  - Table 1 (logit probability coefficients): indigenous 0.557*** for Prospera; rural 1.297*** for Prospera; 5th income quintile -1.606*** for Prospera.
  - Table 2 (OLS amounts, pesos): Prospera constant 621.0***; indigenous → Prospera 198.6***; rural → Prospera 553.5***; 5th income quintile → Prospera -249.2***.
  - R-squared values for amount regressions: Prospera 0.201, NC pension 0.387, Proagro 0.011, Scholarship 0.005, Medical 0.002.

### Note on methods
- Coverage is calculated at the household level.
- Regressions use households with at least one adult; benchmark household: two adults, two children, no one over 65, urban Southern state, non-indigenous head with primary education only.

### *Source: INEGI; Authors’ calculations.*

---

### 4.2    Progressivity

### Definitions and interpretation
- Absolute progressivity: absolute amount of a transfer decreases with income; concentration curve lies everywhere above the 45-degree line → negative concentration coefficient.
- Relative progressivity: ratio of transfer to pre-transfer income declines with income; concentration curve lies everywhere above the net market income Lorenz curve.
- Kakwani index = Gini(NMI) − concentration coefficient. Positive Kakwani necessary for relative progressivity; Kakwani larger than NMI Gini necessary (but not sufficient) for absolute progressivity.

### Empirical findings (2004 and 2016)
- All transfers were everywhere progressive in relative terms in both 2004 and 2016.
- Absolute progressivity:
  - Prospera (Oportunidades): everywhere progressive in absolute terms in both 2004 and 2016.
  - Proagro: progressive in absolute terms only in 2004.
  - Non-contributory pensions: progressive in absolute terms in 2016 (no 2004 data available).
- Kakwani indices (Table 3):
  - 2004: Prospera 0.909; Proagro 0.780; Scholarships 0.327; Memo NMI Gini 0.481. (NC pensions and Medical n/a)
  - 2016: Prospera 0.803; NC pensions 0.765; Proagro 0.702; Scholarships 0.279; Medical transfers 0.296; Memo NMI Gini 0.467.
- Overall Kakwani indices for transfers are positive in both years; indices are lower in 2016 than 2004, suggesting possible erosion in progressivity despite average benefit amounts increasing.

### Visuals referenced
- Figures 8 and 9: concentration curves for Prospera, Proagro, Scholarships (2004) and Prospera, NC pensions, Proagro, Scholarship, Medical (2016).

---

### 4.3    Inequality of Opportunity

### Measure and focus
- Opportunity index: share of income inequality explained by a circumstances set (here: state and size of locality), using mean log deviation on smoothed income distribution.
- Higher index → larger inequality of opportunity.

### Main results (Table 4)
- Net Market Income (NMI) opportunity index:
  - 2004: 20.9%
  - 2016: 16.5%
- NMI + Prospera:
  - 2004: 20.6%
  - 2016: 15.9%
- NMI + Non-Contributory Pensions:
  - 2004: n/a
  - 2016: 17.0%
- NMI + Proagro:
  - 2004: 20.3%
  - 2016: 16.5%
- NMI + Scholarships:
  - 2004: 20.9%
  - 2016: 16.6%
- NMI + Medical Transfers:
  - 2004: n/a
  - 2016: 16.6%
- Total Income After Transfers:
  - 2004: 20.1%
  - 2016: 16.2%

### Takeaways
- Inequality of opportunity based on geography fell for both NMI and total income after transfers between 2004 and 2016.
- Government transfers reduced inequality of opportunity: the proportion of inequality explained by geography decreased from NMI to total income after transfers in both years.
- Program-level effects:
  - 2004: Proagro reduced the opportunity index by 0.6 percentage points; Prospera reduced it by 0.3 percentage points; scholarships had no effect.
  - 2016: Prospera reduced the opportunity index by 0.6 percentage points; Proagro did not affect the index.
  - Non-contributory pensions, scholarships, and medical non-monetary transfers increased the opportunity index in 2016.
- Overall, the opportunity index remains lower after transfers.

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### 4.4    Effectiveness

### Definition
- Effectiveness indicator (Lustig and Higgins, 2013): (Gini without transfer − Gini with transfer) divided by transfer size as percent of GDP. Also computed analogously for the poverty index.

### Aggregate amounts and shares (2016, Table 5)
- Total transfer amount (billions of pesos per quarter):
  - Prospera 15.47
  - NC pensions 8.44
  - Proagro 2.07
  - Scholarships 3.46
  - Medical 9.35
  - All transfers 48.50
- Mean share of total income (%):
  - Prospera 2.8
  - NC pensions 1.7
  - Proagro 0.3
  - Scholarships 0.2
  - Medical 0.6
  - All transfers 6.8

### Effectiveness indicators (2016, Table 5)
- Effectiveness (Gini reduction per transfer size):
  - Prospera 2.67
  - NC pensions 2.50
  - Proagro 2.14
  - Scholarships 0.24
  - Medical 0.17
  - All transfers 1.74
- Effectiveness (poverty reduction per transfer size):
  - Prospera 5.14
  - NC pensions 4.46
  - Proagro 4.56
  - Scholarships 1.32
  - Medical 1.58
  - All transfers 3.64

### Interpretation and counterfactuals
- Prospera has the highest effectiveness in reducing inequality, followed by NC pensions and Proagro; scholarships and medical transfers have effectiveness about ten times smaller than the first three.
- Prospera and NC pensions represent about half of the total government transfers received by an average household but account for 73 percent of the decline in the Gini coefficient from transfers and two thirds of the decline in the poverty index from transfers.
- Hypothetical reallocation: The Gini coefficient and poverty index could theoretically drop by 2.6 percent and 5.6 percent respectively if amounts currently allocated to Proagro, scholarships, and medical transfers were distributed as progressively as Prospera and NC pensions (illustrative, mathematical exercise).

### Notes
- The five separately identified transfers do not sum to “All transfers” because other small transfers exist; identified five represent more than 80 percent of total reported transfers.
- Poverty cutoff used: 50 percent of the median total household income.

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### 5    Government scholarships and medical transfers

### Government scholarships: coverage and regressions to progressivity
- Enrollment and scholarships by education level (2016, Figure 11):
  - Primary education:
    - Enrollment even across income quintiles.
    - Average scholarship amount increases with income.
    - Primary scholarship amounts are substantially lower than for other levels, limiting overall progressivity.
  - Secondary education:
    - Both enrollment and probability of receiving a government scholarship increase with income.
    - Scholarship amount roughly even across quintiles.
  - Tertiary education:
    - Enrollment increases with income.
    - Probability of receiving a government scholarship conditional on enrollment decreases with income.
    - Average scholarship amount conditional on receipt increases sharply with income (consistent with merit-based scholarships and attendance at more expensive institutions by wealthier students).
- Net effects: children from poor households are less likely to enroll in secondary or tertiary education, less likely to receive scholarships for secondary education, and tend to receive smaller scholarships for tertiary education → contributes to scholarships being less progressive.

### Medical non-monetary transfers: distribution and potential causes
- Transfer amounts by quintile (2016):
  - Bottom quintile: about 50 pesos per quarter.
  - Top quintile: about 800 pesos per quarter.
- Total medical spending (government transfers + out-of-pocket, per quarter):
  - Bottom quintile: about 500 pesos.
  - Top quintile: a little more than 3500 pesos.
- Share of expenses covered by government transfers increases with income → indicates room to improve progressivity.
- Urban/rural and North/South patterns:
  - Rural households receive more medical subsidies than urban counterparts, especially for households at the top of the income distribution.
  - Southern households receive higher medical transfers than Northern households in the top three quintiles.
  - These patterns contradict the hypothesis that lower-income households receive fewer subsidies due to poorer access in rural/Southern regions.
  - One possible explanation: healthcare facilities associated with Seguro Popular may be scarcer in rural and Southern areas.

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### 6    Conclusion

- Government transfers in Mexico have played a key role in alleviating poverty, containing income inequalities, and reducing inequality of opportunity.
- All transfers analyzed are progressive in relative terms.
- Prospera and the non-contributory pension program for elderly adults are the most effective programs at reducing inequality because they target households at the bottom of the income distribution.
- Government scholarships and non-monetary medical transfers increase with income, possibly reflecting differences in access to tertiary education and medical services.
- The analysis does not capture dynamic effects:
  - Tertiary-education transfers that disproportionately benefit wealthier students may aggravate future inequality.
  - Non-contributory pensions, while reducing old-age poverty short-term, could discourage formal employment and pension contributions long-term.
- Dynamic effects of social policies are left for future research.

*Source: INEGI; Authors’ calculations.*

### References

### References

### Mexico: income inequality and labor/education
- Raymundo Campos, Gerardo Esquivel, and Nora Lustig. The rise and fall of income inequality in Mexico, 1989-2010. UNU-WIDER Working Paper, (10), January 2012.
- Fernando Cortés. Medio siglo de desigualdad en el ingreso en México. Economía UNAM, 10(29):12–34, 2013.
- Miguel del Castillo Negrete Rovira. Income inequality in Mexico, 2004–2014. Latin American Policy, 8(1):93–113, 2017.
- Luis Felipe López-Calva and Santiago Levy. Labor earnings, misallocation, and the returns to education in Mexico. IDB Working Paper, (671), 2016.
- Luis Felipe López-Calva and Nora Lustig. Explaining the decline in inequality in Latin America: Technological change, educational upgrading, and democracy. In Declining Inequality in Latin America: A Decade of Progress?, chapter 1. Brookings Institution Press, May 2010.
- John Scott. Redistributive impact and efficiency of Mexicos fiscal system. Public Finance Review, 42(3):368–390, 2014.
- John Scott, Enrique de la Rosa, and Rodrigo Aranda. Inequality and fiscal redistribution in Mexico, 1992-2015. UNU-WIDER Working Paper, (194), November 2017.

### Conditional cash transfers and social program implementation
- Laura G. Dávila Lárroga. How does Prospera work? best practices in the implementation of conditional cash transfer programs in Latin America and the Caribbean. Technical Report IDB-TN-971, April 2016.
- Susan W. Parker and Petra E. Todd. Conditional cash transfers: The case of Progresa/Oportunidades. Journal of Economic Literature, 55(3):866–915, 2017.
- Susan W. Parker and Tom Vogl. Do conditional cash transfers improve economic outcomes in the next generation? Evidence from Mexico. Technical Report 24303, February 2018.
- CONEVAL. Inventario de programas y acciones federales de desarrollo social 2016. 2016. URL https://coneval.org.mx/Evaluacion/IPFE/Paginas/historico.aspx.
- CONEVAL. Ficha de Monitoreo 2017-2018. 2018. URL https://www.coneval.org.mx/Evaluacion/IEPSM/Documents/Fichas-Monitoreo-y-Evaluacion-2017-2018.pdf.

### Poverty, inequality, and regional outlooks
- IMF. Poverty and inequality in Latin America: Gains during the commodity boom but an uncertain outlook. In Regional Economic Outlook, May 2018: Seizing the Momentum, chapter 5. International Monetary Fund, 2018.
- Nora Lustig, Luis Felipe López-Calva, and Eduardo Ortiz-Juarez. The decline in inequality in Latin America: How much, since when and why. Tulane University Working Paper, (1118), April 2011.
- Jose P. Mauricio Vargas and Santiago Garriga. Explaining inequality and poverty reduction in Bolivia. IMF Working Paper, (WP/15/265), December 2015.
- OECD. OECD Economic Surveys: Mexico 2017. OECD Publishing, Paris, 2017.

### Measurement, methodology, and tax progressivity
- Nanak C. Kakwani. Measurement of tax progressivity: An international comparison. The Economic Journal, 87(345):71–80, March 1977.
- Nora Lustig and Sean Higgins. Commitment to equity assessment: Handbook. 2013.

### Health, prevention, and social outcomes
- Melissa Knox. Creating a preference for prevention: the role of universal health care in the demand for preventive care among Mexico’s vulnerable populations. Health Policy and Planning, 33(7):853–860, August 2018.

*Source: wpiea2019148 - References*

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_Source: https://www.imf.org/-/media/files/publications/wp/2019/wpiea2019148.pdf_