Vicente German-Soto

Cointegration with structural changes between per capita product and income inequality in Mexico

The long-run relationship between per capita product and income inequality in Mexico is assessed for the period 1963–2010. The methodology consists of stochastic unit root techniques with structural changes. The integration and cointegration tests suggest that it is not possible to understand this link if the possibility of structural changes is not taken into account. Causality, running from per capita product to income inequality, and a negative and significant overall effect are estimated. However, after the regime shifts – mainly estimated to occur in the 1980s – the connection is no longer meaningful. This result seems to be linked to the slow growth of the Mexican economy after these structural breaks, affecting, in turn, the reductions in income inequality.

The Long-Run Relationship among Health and Income in Mexico, 1940-2011

Theoretically, it has been argued the existence of not only a strong positive correlation among health and real per capita income, but also that their variations are highly interconnected. The stationarity among health indicators and income is analyzed for Mexico, allowing for the presence of multiple structural breaks along 1940-2011, with the aim to study its long-run relationship and how the reductions of the public expenditure have affected this link. One novelty is the long-run perspective supported on structural breaks that affect both the level and the slope of the time series. After the serial correlation is accounted for, several stationary processes evolving around a broken trend are found. The estimated breakpoints are widely related to events as crises and health system reforms, while the corresponding regimes changes lead to a stage of minor health expenditure. This last can be of concern to government and society if improvements on health and economic development are desired.

Testing Stochastic Convergence among Mexican States: A Polynomial Regression Analysis

Another look on the economic convergence among Mexican states is offered examining whether they are approaching along 1940-2010. Methodology is based on polynomial regressions, a method that determines whether predictions can be significantly improved by increasing the complexity of the fitted straight-line model. Estimates from a set of polynomial terms are a theoretical approximation to income differentials, so it constitutes an adequate frame to analyze if different initial conditions tend to diminish in the long-run. We calibrate for each economy the polynomial equation of best adjustment supported in information criteria and a strategy of backward iterative elimination. Empirical results are according with the stochastic convergence, but in a relationship where it changed after trade opening, poorer states are diverging and richer states are converging. A focalized regional policy is necessary with the aim to correct the biases produced in a context where some regions are lagging while others more are advancing.

Assessing the Historical Water Flow Allocation in the Lower Rio Grande between Mexico and the United States

Abstract Allocation of water resources between Mexico and the United States is a sensitive agenda in the lower Rio Grande, mainly in stages of hard drought. It has allowed surface water allocation practices to evolve and continue to be refined. This work applies the cointegration theory on historical data of water flows with the aim of showing empirical evidence on volumes of water running along the lower Rio Grande. The analysis suggests that misleading conclusions can be obtained about water distribution if the presence of structural breaks is not taken into account when assessing the fulfillment of contracts. The estimations indicate that water flows have not been constant over time; nevertheless, this pattern seems to respond to external events such as changes in the treaties, drought stages, and infrastructure conditions that possibly altered the water flows. After one structural break is controlled for, it is possible to determine that water volumes were according with the laws during 1933–2004.