Stratification in the Post-neoliberal Age: A Quantile Approach to Earnings Inequality in Mexico (2006-2011)

• In Event: 332 - Section on Inequality, Poverty and Mobility Paper Session. Economic Inequality and Institutions

Abstract

Research on labor markets in Latin America has documented worsening inequality in the period immediately subsequent to the implementation of neoliberal reforms, but a reduction in inequality more recently. Most analyses of these dynamics emphasize the importance of the proximate determinants of earnings attainment: changing returns to education and experience. However, such a view unduly neglects analyzing the role of social background characteristics in the determination earnings. This article draws on two waves of the Mexican Mobility Survey (2006 and 20011) to redress the dearth of empirical work examining the importance of social background characteristics in the determination of earnings inequality. Relying on quantile regressions I find that the recent compression in returns to education is only evident at the lower end of the earning distribution, and that naïve Mincerian equations used in most approaches to labor markets in developing countries typically overestimate the net effect of education. Including covariates for father’s education and occupational status, reduces the direct effect of respondent’s education in OLS estimates. Moreover, such covariates produce substantial differences across earnings deciles in earnings “payouts” to background characteristics. The results provide suggestive evidence of the indirect, yet persistent, role played by socioeconomic background characteristics in the determination of labor market inequality, and suggest that shifts in hitherto restricted mobility regimes might be taking place across the region. Such findings indicate the need for a social stratification perspective on the relationship between development and inequality.

Author

• Harold J. Toro, Univresity of New Mexico