Simulating tax-benefit policies to alleviate poverty and reduce inequality in Mexico

Background

Extreme inequality has been highlighted as an important challenge affecting the economy and society in Mexico. Recent studies have highlighted that, over the last ten years, the richest people in Mexico have increased their share of GDP from 2% to 9% whereas 53% of the population lives in poverty. At the same time, the tax and benefit system has a very limited redistributive role, which points to the need of implementing reforms aimed at reducing poverty and inequality. The COVID-19 outbreak has brought additional economic hardship to Latin America, reinforcing inequalities, and the depth of this effect is likely to be more severe in already highly unequal societies as it is the case in Mexico.

Description

The project’s main goal is to contribute to the development of tools to evaluate social policies aimed at reducing poverty and inequality in Mexico by means of a tax-benefit microsimulation model. Moreover, taking into account previous experiences with EUROMOD based models for Colombia and Ecuador, the proposed Mexican model (MEXMOD) has spill over effects and also benefits from a broader research agenda on public policies, poverty and inequality in Latin-America, ultimately benefiting policy making in one of the most unequal regions in the world.
The project consists of three main activities:
1. Developing MEXMOD, the open access tax-benefit microsimulation model for Mexico.
2. Producing a policy brief on the distributional effects of the COVID-19 pandemic in Mexico.
3. Organizing a virtual conference about Microsimulation and distributional analysis in Mexico.

Outputs

The outputs of the project include the model, input dataset and model documentation and a policy brief, all of which are available at the model webpage: www.ciad.mx/mexmod.

A virtual conference was held on the 11th February 2021