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Document Type

Open Access Dissertation

Degree Name

Doctor of Philosophy (PhD)

Degree Program

Economics

Year Degree Awarded

2015

Month Degree Awarded

September

First Advisor

Peter Skott

Second Advisor

Deepankar Basu

Third Advisor

José Angel Hernández

Subject Categories

Growth and Development | Income Distribution | Macroeconomics

Abstract

This dissertation presents four essays on inequality, credit constraints, and economic growth in the Mexican economy in its recent history, or “contemporary Mexico”. In the first essay, it is argued that the possibility that wealth/income inequality could affect economic growth has been neglected in the contemporary Mexican economy literature. Also, preliminary thoughts on the channels through which inequality could have been affecting growth are offered. In the second essay, a time series, macroeconometric analysis on the possible relationship between inequality and aggregate production (GDP) in Mexico is presented. The analysis suggests that an increase in inequality boosts the economy, but that such effect is very short lived and is followed by a much more prolonged negative effect. In the third essay the question of how, if at all, credit constraints have been affecting physical capital investment is addressed. The analysis is carried out using establishment-level data that are both recent and reasonably nationally representative. To the best of my knowledge this is a novel contribution. It is a common tenet of the literature on why Mexico -despite its vast liberalization process occurring since the 1980s- has not achieved high and sustained growth, that credit constraints are an important reason explaining the sluggish growth. When digging deeper in the literature, however, very few empirical studies offering evidence in favor of such claim are found; a contribution using microeconomic data with the intention of being nationally representative could not be found. Consistent with the general claims of the literature, the findings of the analysis are that credit constraints negatively affected investment decisions. The fourth essay examines theoretical issues. The links between credit constraints and growth may seem obvious. But one would still like to have a clarification of the mechanisms, through formal modeling. To the best of my knowledge, such a formal model has not been proposed in the recent Mexican literature. The essay, thus, presents a model in which credit constraints can reduce capital accumulation. It is, I believe, applicable to the contemporary Mexico case.

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