The Mexican economy has performed poorly over the last 30 years. Monopoly, regulation,
taxation and the poor quality of infrastructure and public services explain much of this poor
performance. These issues are much discussed but little acted on in Mexican public policy.
We have discussed two additional topics not usually mentioned in discussions of
Mexican productivity and economic growth that deserve much greater attention. First, we show
that there is an increasing proportion of children living in disadvantaged environments due to
changing family structures. Such arrangements lead to less investment in children. This
phenomenon will have major implications for child development and the productivity of the
work force of the next generation. Progresa/Oportunidades operates too late in the life cycles of
disadvantaged children to be effective. There would be high returns to policies that better target
the early preschool years of disadvantaged children.
Second, we have addressed the problem of informality in the Mexican economy. The
major cause of informality is regulation and taxation. Regulation causes less productive firms to
participate in the informal sector to avoid costs. This has dynamic effects on investment in
physical and human capital, and reduces productivity growth in Mexico. There is little evidence
that the introduction of social programs targeted towards informal workers has played a major
role in promoting informality.