Growth and inequality in the Mexican states: Regimes, thresholds, and traps

Using the inter-regional economic inequality index and the gross state product per capita for the Mexican states over the period 1940–2015, we apply regime dynamics and hierarchical cluster analysis for segmenting the sample into regimes of Mexican states with similar performance. Robust econometric models are studied showing the direction of causality between economic inequality and income per capita, and the existence of a U-shaped curve for the interdependence between economic growth vs economic inequality, and threshold levels. We additionally demonstrate the existence of inequality traps. The education literacy rate as a control variable indicates an inverted U-shaped curve.