NTA2020 Mejía-Guevara

Global Meeting on Population and the Generational Economy, August 2020

Presentation: Iván Mejía-Guevara, Isali Nava-Bolaño, René F Lazcano, Elvira Cedillo, Unlucky Cohorts? Income and Consumption effects of the 1995 and 2009 Economic Downturns in Mexico

Abstract

Macroeconomic performance in Mexico during the last thirty years has been disappointed, the average rate of compensation has stagnated or declined, per capita Gross Domestic Product (GDP) growth has averaged around one percent per year during this time period and recurrent economic downturns are making things worst or delayed any potential recovery–as the one expected to hit the country due to the Covid-19 pandemic outbreak. In this article we analyse the potential period effects of the 1995 and 2009 economic downturns (which accounted for 6.3 and 5.3 percent declines in GDP growth, respectively), on the average labor income and consumption by different affected cohorts. Data are from National Transfer Accounts (NTA) estimates of labor income and consumption age profiles from 12 biennial repeated cross-sectional Household Income and Expenditure Surveys (ENIGH) from 1992-2014. We conduct descriptive exploratory analysis of period and cohort effects using Median Polish Analysis, while testing for linear identification problems using sensitivity checks. Preliminary results indicate that income and consumption both decline by around 20% in 1995, and by 5% in 2008, the difference perhaps attributable to different underlying characteristics of both economic crises (e.g., unemployment rates were 6.9% and 5.4% in the respective years). A visual inspection of the age profiles of labor income and consumption reveals evidence of cohort effects that are declining for younger cohorts.

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