Ageing, Inequality and Social Security in Mexico: A Micro-Simulation Approach

The aim of this paper is to analyze the impact of ageing on labor and pension income distribution in Mexico under different scenarios of social security coverage. Static and accounting micro-simulations are used to build synthetic populations in 2025 and 2050. The main findings of the work are, firstly, that, in spite of the critical increase in the elderly population share predicted by the main national and international economic institutions, the level of income dispersion is not likely to dramatically increase in the coming decades. On the contrary, inequality might be reduced in the next few decades because of the higher educational attainment and female activity rates observed among young cohorts at the present moment. Secondly, an upward shift in pension coverage —either through an increase in the share of the population receiving contributory pensions or the establishment of non-contributory old-age benefits— could be an effective tool to achieve improvements in income distribution figures.