DECOMPOSITION ANALYSIS OF INCOME INEQUALITY IN MEXICO, 2016-2024

Income inequality should be a key subject in economic analysis; it ought to be at the centre stage of economic theory. In particular, the study of households’ income sources is fundamental to get to know the mechanisms shaping inequality. In this article income surveys are used to scrutinize income inequality in Mexico during the period 2016-2024. A decomposition analysis of the Gini index (Shorrocks, 1982; Lerman and Yitzhaki, 1985) for every year with information available and a decomposition of the change of the Gini index during the period (Cortés, 2000) are here conducted. We found that labour income is the income source which contributed the most to inequality, given its high share in total income. Government benefits, in turn, contributed to reduce inequality only during the first two years, then they augmented it. On the other hand, with respect to changes in the Gini index, labour income contributed to diminishing it, whilst government benefits increased it. This result speaks to the need of redesigning social programs with a view to strengthening the State´s redistributive action within a social rights framework.