This chapter examines changes in individual earnings during positive and negative growth periods in three Latin American economies: Argentina, Mexico, and Venezuela. We ask two major questions. First, do panel income changes favor the income recipients who started at the top of the income distribution (“divergent mobility”) or those who started at the bottom (“convergent mobility”)? And second, are the groups that are found to gain the most when the economy is growing those that are found to lose the most when the economy is contracting (“symmetry of mobility”) or is the pattern asymmetric in the sense that the same groups do best both in times of economic growth and in times of economic decline? We find support for the divergent mobility hypothesis only in scattered years in the cases of Mexico and Venezuela and no support at all in the case of Argentina. Rather, earnings mobility is most frequently convergent or neutral in all three countries. As for the symmetry of mobility hypothesis, we find that it is rejected in nearly all cases; rather, those groups that gain the most when the economy is growing are also the ones that gain the most or lose the least when the economy is contracting. Furthermore, we discuss how the absence of divergence reconciles with rising inequality in the countries under study.

In this paper we reconcile, both theoretically and empirically, changes in cross-sectional inequality with patterns of panel income changes during periods of economic growth and decline. Using panel earnings data from Mexico, we find that the panel changes are convergent in almost every period, the reason being that a large number of individuals experience small convergent earnings changes while a small number of individuals experience large and convergent earnings changes. We examine what accounts for the inequality of log-earnings at a point in time and for the inequality of the log of earnings averaged over five quarters. We find that the equalization brought about by panel earnings changes is mainly associated with changes in employment status and in sector of employment and not by personal characteristics such as schooling, age, and gender. JEL Codes: J31, D63These two equations are equivalent in that one can recover c y and d y from a y and b y and vice versa. However, the two regressions lead to different coefficients of determination.

We reconcile, both theoretically and empirically, changes in inequality with panel income changes over periods of economic growth and decline. We also explore what factors account for the trends of short-run inequality and of inequality in individual average earnings. Finally, we explore what factors account for the equalization brought about by economic mobility. Using panel earnings data from Mexico we find that earnings changes are convergent, irrespective of whether inequality rises or falls. This is caused by a small fraction of individuals experiencing large and convergent earnings changes. The equalization that earnings changes bring over a year is mainly driven by changes in the employment and sector of workers.

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This paper conducts a cohort analysis of labor participation in urban Mexico in recent decades. The rates analyzed are the labor force participation, the unemployment rate, and the employment shares of the formal and informal salaried sectors, as well as of selfemployment. These rates are decomposed into age, cohort, and time effects. The life cycle patterns of labor force participation and formal employment follow a standard inverted Ushape. Younger workers are more likely to participate in the informal salaried sector, while self-employment increases monotonically with age. However, significant informal salaried employment is also observed among older unskilled workers and women of different ages. Strong countercyclical variations are observed for the informal salaried sector, while the opposite occurs for the formal sector. Self-employment fluctuations are for the most part acyclical. These facts support a mixed view of the labor markets whereby some informal sector workers are rationed out of the formal sector, while others go into this sector voluntarily. The analysis also indicates that the female labor force is countercyclical, suggesting the existence of an "added worker" effect. Long-run generational effects show a steadily rising participation in the informal sector with a corresponding decline in formality among newer generations of salaried workers. Some preliminary explanations for this fact are discussed.