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Growth and Poverty. The case of México

  • Isidro Soloaga

Although poverty levels have been diminishing in Mexico since the late 90’s, several regions still show high levels of poverty which are extremely high in some rural areas. The paper addresses the issue of the linkages between sectoral growth (urban/rural) and poverty levels by applying Ravallion and Datt (1996) reduced equation´s approach to regional data for Mexico. Poverty levels in rural and urban areas are thus linked to the performance of agricultural and non agricultural growth. Although the data cover only 8 years, following Deaton (1994) we make use, for the first time to these data to the best of our knowledge, of their spatial variation to get enough degrees of freedom. The main finding of the paper was that, although both types of growth impacted negatively on poverty levels in Mexico, rural growth seems to have had substantially higher power in improving consumption per capita for the poorest among the poor people. Urban growth affected mostly urban poverty whereas rural growth affected principally rural poverty. The only inter-sector linkage found was the one that connects rural growth with urban poverty for those people above the food-poverty line but below the moderate poverty line. Exploring plausible channels, we have found that whilerural growth enhances equality of income distribution at total and urban levels, urban growth does exactly the opposite increasing inequality in rural areas. We further explored labor market issues and found that rural growth impacted positively on labor demand for unskilled workers. We have also explored the issue of the impact of rural/urban growth on relative food prices, although no impact was found here. The share of agriculture in total income is relatively more important for poor people in rural areas, and most of the food-poor people live in rural areas. This may be at the root of our findings

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Paper provided by Econometric Society in its series Econometric Society 2004 Latin American Meetings with number 93.

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Date of creation: 11 Aug 2004
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Handle: RePEc:ecm:latm04:93
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  1. Woden, Q.T. & Ayres, W. & Barenstein, M. & Hicks, N. & Lee, K. & Maloney, W. & Peeters, P. & Siaens, C. & Yitzjaki, S., 2000. "Poverty and Policy in Latin America and Caribeean," Papers 467, World Bank - Technical Papers.
  2. Levy, Santiago, 1991. "Poverty alleviation in Mexico," Policy Research Working Paper Series 679, The World Bank.
  3. Kakwani, Nanak, 1993. "Statistical Inference in the Measurement of Poverty," The Review of Economics and Statistics, MIT Press, vol. 75(4), pages 632-39, November.
  4. Lipton, Michael & Ravallion, Martin, 1993. "Poverty and policy," Policy Research Working Paper Series 1130, The World Bank.
  5. Datt, Gaurav & Ravallion, Martin, 1998. "Farm productivity and rural poverty in India," FCND discussion papers 42, International Food Policy Research Institute (IFPRI).
  6. Miguel Szekely & Nora Lustig & Martin Cumpa & Jose Antonio Mejia, 2004. "Do we know how much poverty there is?," Oxford Development Studies, Taylor & Francis Journals, vol. 32(4), pages 523-558.
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