Eleventh Global Studies Conference

Abstract

Inequality has been declining slowly but steadily for the past twenty years in many Latin American countries. The usual explanations for this decline tend to focus on the improvements in education and income for the least advantaged, without looking at the situation of the other segments of the population. With Mexico as a case study, this paper will argue that inequality reduction was accomplished at the expense of the middle class. Using microdata from the National Household Income and Expenditure Surveys of Mexico in the period 1992-2014, it will analyse the evolution and structure of the income distribution, highlighting the differences between economic classes. Results suggest that the middle class may have shrunk since the 1990s, an unexpected outcome that differs from regional and global trends. Instead, the population’s vulnerability to fall into poverty has increased. The literature suggests that the middle class holds an importance in enabling economic growth, increasing the market size, demanding specialized goods and services, maintaining political stability, consolidating democracy, and even promoting redistribution policies to reduce poverty. If the middle class becomes a net loser in the redistribution process, it could entail negative implications for the whole society, not only in Mexico, but in many countries where this phenomenon has been observed since the recent financial crisis.