EFFECTIVE DEMAND AND INCOME DISTRIBUTION IN THE RECENT EVOLUTION OF THE MEXICAN ECONOMY

Resumen

During the past three decades Mexico’s economic performance has been disappointing, and the objective of this paper is to study Mexico’s economic evolution empirically, from the mid-1980s onwards, basing the analysis on the principle of effective demand as a theoretical framework. The authors use modern econometric procedures to test hypotheses regarding the role macroeconomic policies —especially fiscal and monetary policies— and income distribution have in shaping output and employment. Our study shows that Mexico’s poor growth performance was mainly due to restrictive fiscal and monetary policy, coupled with the deterioration of the wage share. While capital accumulation and supply conditions evolved at a rather slow pace, the growth of effective demand was also slow, such that demand, not supply, was the real constraint in the period under consideration.