Income Inequality and Government Transfers in Mexico

IMF Working Papers, July 11, 2019

Source details

Data source: microdata from Mexico's survey on household income and expenditures (ENIGH).
Coverage period: 2004-16.
Main finding: evidence of only a small decline in income inequality over 2004-16.
Attribution: the observed decline may be attributed to government transfers, notably targeted cash transfers (Prospera) and non-contributory pensions.
2016 impact: Prospera and non-contributory pensions accounted for more than two thirds of the reduction in the Gini coefficient due to government transfers.
Other transfer programs assessed as not as effective: farmland subsidies (Proagro), government scholarships, and non-monetary transfers for medical expenditures.

Transfers analyzed include targeted cash transfers (Prospera), non-contributory pensions, Proagro (farmland subsidies), government scholarships, and non-monetary medical transfers.
Relative effectiveness:
- Prospera and non-contributory pensions: major contributors to the reduction in inequality attributable to transfers (combined share > two thirds of transfer-driven Gini reduction in 2016).
- Proagro, government scholarships, non-monetary medical transfers: limited effectiveness in reducing measured inequality over the period.

Targeted cash transfers and non-contributory pensions appear central to the modest decline in inequality observed between 2004 and 2016.
Broader or alternative designs for other transfer programs (Proagro, scholarships, medical in-kind transfers) may be required to increase their effectiveness in reducing inequality.