Abstract

CARMONA GUERRERO, Nancy  and  CAAMAL-OLVERA, Cinthya G.. Have federal transfers managed to reduce inequality in the states in Mexico?. EconoQuantum [online]. 2018, vol.15, n.1, pp.31-51. ISSN 2007-9869.  https://doi.org/10.18381/eq.v15i1.7111.

Mexico is a highly centralized country; federal government assigns resources to the states and the municipalities’ governments. The federal transfers represent 85% of the total local government´s income. This paper analyzes whether higher federal transfers imply a lower wage inequality within state governments for the period from 2002 to 2012. It uses dynamic panel data methods to estimate this relationship because of the existing endogeneity. Federal funds labeled for fiscal sustainability of the local government finances reduce wage inequality; particularly, federal funds targeted to municipalities reduce much more the inequality relative to those targeted to states. Thus, decentralization reduces wage inequality.

Keywords : Federalism; inequality; labor income; Latin America; H770; J310; O150; O54.