Regional Income Distribution in Mexico: New Long-Term Evidence, 1895-2010

Recent studies in economic history have investigated long-term changes in regional income inequality in various countries after their domestic markets have been regionally integrated. But this literature has focused mainly on developed economies. Evidence is needed from developing economies. This paper is the first investigation of Mexican regional income disparity over the long term, from the early stages of domestic market integration to the present day (1895-2010). The results show that, despite a persistent north-south income division and very low rank-income mobility, regional inequality has been N-shaped over the long term. This trend is closely correlated to the economic models adopted by Mexico since the late nineteenth century. Box-plot graphs and kernel densities suggest that the initial divergence was driven by rich states becoming richer and poor states becoming poorer, and the subsequent convergence by rich states' incomes falling towards the national average and poor states' incomes improving. Moran's I coefficients show that the only statistically significant income cluster appearing over the entire period was the low income cluster formed by the southern regions. In other words, in Mexico, having rich neighbours does not bring a region prosperity.