Extension of the Research Facility on Inequalities in Mexico

Mexico has enjoyed significant economic growth in recent decades, partly due to its integration into world trade. While trade has been beneficial in terms of reducing inter-country inequality, it has not been able to overcome either extreme poverty or high inequality in the country. Although official data show a reduction in the rate of inequality over the past 25 years, Mexico remains one of the most unequal countries in Latin America, with a Gini coefficient of 0.46 in 2018.

Research conducted in Mexico during the first phase of the Research Facility on Inequalities has shown low wealth sharing and limited social mobility. Indeed, empirical evidence shows that 70 per cent of Mexicans born in the lowest quintile will remain in poverty, while 52 per cent of those born in the highest quintile will remain in this quintile throughout their lives. The preliminary studies carried out in the context of the Facility also show high levels of inequality and an overestimation of the tax burden in terms of income tax. 

Research and consultations with partner research centres and local authorities have identified two specific areas of intervention to effectively address inequality: labour policies, specifically the care economy, and the redistributive impact of environmental policies. In the framework of the Extension of the EU-AFD Research Facility on Inequalities (RFI), the program activities in Mexico will therefore be structured across two pillars: enhancing the role that the care economy can play in reducing inequalities and analyzing the distributional impact of environmental taxation.

In order to support the Mexican authorities in the development of public policies having a strong impact in terms of reducing inequalities, the Extension of the EU-AFD Research Facility on Inequalities, in collaboration with local research centers and the government, is implementing four projects: 

• Distributive impact of green taxes in Mexico: this project, jointly conducted by RIBOS, Commitment to Equity Institute (CEQI) and LNPP, will seek to estimate the effect of green taxes in the context of the overall Mexican tax system using the international methodology developed by the CEQI. It will ultimately aim to provide Mexican policy makers and stakeholders with timely analyses of the effects of tax policies on inequalities and poverty. 
• The National Care System and inequalities: with the support of CEEY, this project aims to propose the design of a national care system that will eventually address structural inequalities and social mobility issues.
• Strengthening value chains and reducing inequality: in partnership with Monterrey Institute of Technology and Higher Education, this research project will examine the phenomenon of relocation of value chains, which not only presents a set of challenges but also a unique opportunity to harmonise regional development throughout Mexico and to reduce inequalities.
• Social economy, just energy transition and inequalities: in partnership with CEEY and in collaboration with the National Institute of the Social Economy (INAES), this research project aims to develop a conceptual and analytical research input for a better understanding of the role that renewable energy cooperatives can play in reducing inequality and increasing social mobility, and how they can be financed. 

In order to feed the debates before June 2024 general elections, the Extension of the EU-AFD Research Facility on Inequalities supports the organisation by CIEP of a series of engagements with the Mexican academic community and wider civil society on the top policy priorities with an inequality lens. The aim is to discuss policy options in the domains of health, education, pensions, water, and  housing, taking into account the urgency of reducing inequalities and the challenges of fiscal sustainability.