In this chapter, we use industrial data to derive estimates of the pattern of change in wage inequality in Mexico and Brazil. Using the group decomposition of Theil's T statistic, we present monthly changes in the dispersion of industrial wages for Brazil (1976 through 1995) and for Mexico (1968 through 1998). Both countries show increases in wage dispersion over time, and we find a strong negative correlation with the rate of real economic growth. Other things being equal, the later Brazilian heterodox stabilization plans seem to have reduced inequality in the short run.

Introduction

A great many things have been written about inequality on the basis of evidence that may charitably be described as thin. As the recent work of Deininger and Squire (1996a) makes clear, the measurement of household and personal income inequality for most countries has been sporadic and of uneven quality. Even where these authors judge the data to be of acceptable quality, the number of observations is generally too few to permit useful time-series analysis. Over the quarter century from 1970 to 1995, Deininger and Squire find only fourteen acceptable estimates for Brazil and only five for Mexico.

This chapter presents measurements of change in the dispersion of industrial wages for Brazil from 1976 through 1995 and for Mexico from 1968 through 1998.