1. Critical Review of the Mexico Poverty Assessment1.1. In not more than a couple of pages, indicate:What issues motivated the report?What analytical tools did the report use to analyze poverty and inequality?What are the main results of the poverty assessment?What are the main policy recommendations?1.2. With a focus on the heterogeneity of poverty, indicate which aspects of poverty appear to be most in need of detailed analysis when making a poverty assessment for Mexico.2. Macroeconomic Context3. Poverty Assessment 3.1. Correlates of poverty in 2004Who are the poor?Where do they live?What do they do?What are their living conditions?3.2. Poverty profiles3.3. Poverty indicators4. Inequality Assessment 4.1. Inequality indicators4.2. Lorenz curves5. Conclusions and Policy Recommendations 5.1. Summary5.2. Policy implications for the current administrationJosiah Johnston and Suzie ShinSeptember 26, 2008International Economic Development Policy (ARE 253)Poverty Assessment in Mexico, 1998-2004 (Quantitative Policy Case #1)1. Critical Review of the Mexico Poverty Assessment 1.1. In not more than a couple of pages, indicate: What issues motivated the report?This report was commission as part of a long-term effort by the World Bank and the Mexican government to reduce poverty. Both parties sought to better understand conditions and mechanisms of poverty, describe trends in poverty reduction, and review the efficacy of ongoing poverty reduction programs to facilitate strategic planning, policy design, and allocation of resources to effective programs. What analytical tools did the report use to analyze poverty and inequality? Several analytical tools were used in this poverty assessment to different ends. Quantile regression was used to show how factors such as the marginal value of education or sources of income transfers varied between income brackets. Linear regression was applied to numeric and categorical survey data to determine the marginal contribution of household characteristics on income, and statistical tests were used to determine which characteristics had a significant effect.Poverty indicators were used to track poverty over time and between rural and urban areas. GIS heat maps were used to show spatial distributions of poverty and correlates such as education. Gini coefficients were used to measure inequality across time and between subpopulations. Frequency distributions were used to visualize the range of income across time for various subpopulations. Vulnerability was assessed by comparing various income groups to a base group in “normal” times and during an economic shock. What are the main results of the poverty assessment? The poverty assessment grouped its results in four main areas: education, health, and basic infrastructure; income poverty; vulnerability; and regional and ethnic differences. In the first category, the report found that education, health, and access to social services were highly unequal according to income group. However, the gender gap in education decreased to the point of being negligible in the younger generation. The poverty assessment also reported significant improvements in the health of the overall population and a broadening of access to basic services. These improvements were not shared across all segments of the population: “For the poor living in rural areas, poor states, and marginal urban areas, access to basic care remains limited and of low quality” (45). Regarding basic infrastructure, the study found that access to services such as water and electricity had expanded among in the extreme poor, even in rural areas, although gains in sanitation service were limited.1In the category of income poverty, the assessment concluded that poverty was widespread, deep, and highly unequal. The extreme poor were characterized as living in rural households with the head of the family working in agriculture and having primary education or less. Not surprisingly, “[e]ducation is associated with a lower probability of being poor after controlling for other factors” (52). In contrast, living in rural areas and being indigenous were associated with a higher probability of being poor.In the context of vulnerability, the poverty assessment distinguished between covariate shocks—aggregate, economy-wide, and common—and idiosyncratic or individual shocks. Their analysis found that the effects of covariate shocks, which have greater impacts in urban areas, were evenly distributed across the urban population, and that even poor, rural households exhibited consumption smoothing in response to idiosyncratic shocks. That is, the high variance in incomein the urban and rural population did not necessarily translate into high variance in consumption. Lastly, rural households with less educated household heads exhibited higher income variation than their urban counterparts, and the less educated suffered greater shocks in consumption across categories. This underscores the inverse relationship between vulnerability and education. In its analysis of regional and ethnic differences, the report emphasized that Mexico’s states are characterized by more variation within them than between them, with respect to levels of well-being as well as patterns of change. “In terms of numbers, there are large groups of the extreme poor living outside the poorest states...Indeed, all parts of Mexico have steep gradients in conditions of living from more developed urban areas, through peri-urban areas and smaller towns, through to the more remote rural areas” (98). The poverty assessment found a certain amount of regional convergence on indicators of services and social conditions, but a tendency towards divergence in income in the 1990s, most likely due to the differential effects of NAFTA. There was a disproportionate representation of indigenous peoples in the extreme poor, which could be linked to the low enrollment rates beyond primary school for this subgroup, particularlyin the southern region of the country. The most common reason cited for dropping out of school was a lack of funds. What are the main policy recommendations?The report offered six main policy recommendations. They recommended increasing taxes and direct revenues into targeted poverty programs, and not worrying overmuch about regressive taxes if the revenues are properly directed. They recommended increasing program services to address gaps in coverage,
View Full Document
Unlocking...