Economics of Education Review 18 1999 183–199
Schooling indicators during Mexico’s “Lost decade”
Melissa Binder
Department of Economics, University of New Mexico, Albuquerque, NM 87131-1101, U.S.A. Received 10 January 1997; accepted 13 February 1998
Abstract
The 1980s have been described as a “lost decade” for Latin America as a result of the sharp decline in income that followed the international debt crisis. Using the case of Mexico, this paper explores the impact of the lost decade on
schooling indicators. This paper finds that falling opportunity costs in the 1980s improved schooling indicators at the same time that reductions in the level of national income worsened them. The net result of these opposing effects was
relatively stagnant enrollment rates. Simulations suggest that Mexico’s secondary school enrollments would have increased considerably, had the 1980s economy grown at rates even one-half of those experienced in the 1970s. Analyses
of state panel data for this period reveal that continuation rates responded more strongly to economic conditions in poorer states, and that state schooling indicators were sensitive to urbanization, sectoral structure and school spending
patterns among states. [JEL I21, O54]
1999 Elsevier Science Ltd. All rights reserved.
1. Introduction
The 1980s have been described as a “lost decade” for Latin America as a result of the sharp decline in income
that followed the international debt crisis. Even by 1994, Latin America’s per capita GDP had yet to regain its
1980 level IDB, 1995; 3. In Mexico, per capita income fell by 6.3 per cent in 1983 and 5.5 per cent in 1986,
and grew by only 1.2 per cent annually between 1988 and 1990. Between 1983 and 1988, real manufacturing
wages fell at an average annual rate of 7.3 per cent Lustig, 1992; 40–41. Several studies have sought to
evaluate the effect of the 1980s economic crisis on schooling in Latin American countries. The absolute
decline in education spending is well established Reimers, 1990; Tilak, 1989. In Mexico, real govern-
ment expenditures on education fell by 40 per cent between 1981 and 1989 Nacional Financiera, 1991.
Nevertheless, the effect on schooling itself has been harder to gauge. Lustig 1992 and Kaztman and Ger-
E-mail: mbinderunm.edu
0272-775799 - see front matter
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stenfeld 1990 report with surprise an improvement in many schooling indicators during the 1980s.
In fact, human capital theory predicts two opposing responses of schooling investments to an economic
downturn. The first is that opportunity costs wages fore- gone by the student decline, lowering the price of
schooling and increasing enrollments. This price effect bodes well for future economic growth as young people
acquire more human capital. But at the same time that opportunity costs fall, more students will face binding
liquidity constraints as family incomes decline. If this income effect dominates, economic downturns may
compromise future economic growth by reducing human capital investments.
A cursory look at enrollment rates in Mexico shows a slowdown in gains made in schooling in the 1980s,
especially at the post-primary level.
1
For secondary
1
Gross primary enrollment rates had already exceeded 100 per cent by 1970. Gross enrollment rates divide matriculation
by the number of school age children in the population. The rate can exceed 100 per cent if there are many older children
enrolled in primary school due to grade repetition or late entry into school.
184 M. Binder Economics of Education Review 18 1999 183–199
school, enrollment rates more than doubled from 22 per cent to 46 per cent between 1970 and 1980, and then
rose more slowly to 55 per cent by 1990.
2
Fig. 1 shows the steep rise and subsequent flattening of secondary
enrollment rates. Post-secondary schooling rose even more modestly, from 14 per cent in 1980 to 15 per cent
in 1990.
An analysis of time series data for the national and state levels for the 1976–77 through the 1993–94 school
years suggests that changes in the secondary enrollment rate—and other schooling indicators as well—can be
traced to the opposing forces of price and income effects associated with economic fluctuations. I find that at
higher levels of national income, the schooling indicators improve, but during economic upturns, when employ-
ment opportunities grow, children also tend to leave school. The response to economic conditions is evident
even at the primary school level, although it is much larger for higher schooling levels, and is relatively
stronger for vocational, as opposed to academic instruc- tion. During the 1980s, the positive effect on schooling
of falling opportunity costs was countered by declining income, yielding relatively stagnant enrollment rates.
National economic indicators have similar effects on state-level schooling indicators, although the response
appears to vary with the relative affluence of states. Urbanization proportion and sectoral economic structure
are also important determinants of state schooling out- comes.
The paper proceeds as follows: in the next two sec- tions I outline the human capital investment model and
review the results of similar studies undertaken in the United States and Great Britain. Sections 4 and 5 provide
a brief overview of the Mexican schooling system, describe the data sources, and develop the empirical
Fig. 1. Secondary enrollment rates. Source: World Bank
WorldData country data series, 1995.
2
Secondary schooling includes both lower grades 7–9 and upper grades 10–12 academic and vocational secondary edu-
cation.
implementation of the model. Sections 6 and 7 report the results at the national and state levels, respectively, and
Section 8 concludes.
2. The human capital framework
