Redistributive Constraints under High Inequality: The Case of Mexico

The paper presents a comprehensive analysis and interpretation of redistributive spending in Mexico. It reviews the evolution over the last two decades of the principal redistributive instruments and the distributive outcomes targeted by these instruments (income, land, education, health, nutrition). Using recent income and expenditure surveys, the paper presents a comparative benefit incidence analysis (BIA) of 25 mayor programs or spending categories covering all public spending on education, health and social security, energy and agricultural subsidies, and the principal targeted anti-poverty programs, globally representing 60% of public spending, 10% of GDP, and 15% of disposable household income. The BIA is extended over the 1992-2008 period for the principal instruments, to evaluate the distributive effects of recent policy reforms. The comparative analysis reveals large contrasts in redistributive performance (concentration coefficients), from the Oportunidades CCT program (-0.53) to agricultural, energy and public sector pension subsidies (0.40-0.80). Overall, the regressive programs cancel out the redistributive effects of the progressive efforts, leading to a regressive absolute distribution of public spending. It identifies the principal factors accounting for these results, focusing on political as well as more general structural constraints on the redistributive capacities of the State under high (pre-transfer) inequality conditions.