This study analyzes regional income inequality in Mexico during 1993-2003, the periods of economic liberalization, using a one-stage Theil decomposition method. The regional income inequality is also studied by sector (commercial, manufacturing and service) for 1989-1999 in order to observe the effects of each sector in the regional inequality as well as to obtain the robustness of the results. My principal empirical results are as follows: First, the overall regional income inequality exhibits an increasing trend in 1993-2003, principally because of the increasing within-region inequality. Within-region inequality has contributed less than between-region component to the overall income inequality, but its contribution has been getting larger in recent years. Second, the increase of the within-region inequality in the region Capital contributed most to the increase of the total within-region inequality. Capital, the most developed region in Mexico, is the most unequal region with the largest increase in within-regional inequality during the period. Third, the increase of the overall regional income inequality in the service sector is outstanding during 1989-1999. In the service sector, both the within and between-region components increased, leading to the significant increase of the overall regional inequality.
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