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Rural structural change, poverty and income distribution: evidence from Peru

Insa Flachsbarth (), Simone Schotte (), Jann Lay () and Alberto Garrido ()
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Insa Flachsbarth: University of Göttingen
Simone Schotte: GIGA Institut für Afrika-Studien
Jann Lay: GIGA Institut für Afrika-Studien
Alberto Garrido: E.T.S. Ingeniería Agronómica, Alimentaria y de Biosistemas

The Journal of Economic Inequality, 2018, vol. 16, issue 4, No 8, 653 pages

Abstract: Abstract Some rural regions of Peru showed remarkable rates of poverty reduction and inequality reduction between 2004 and 2012, while others lagged behind. Using microsimulation-based decompositions, we analyse the driving forces behind these trends, finding that rural poverty and inequality reductions are mainly attributable to increasing labour incomes in Peru’s agricultural sector and, to a smaller extent, increasing public transfers. In earlier years, higher returns to experience drive these results, while in later years, increasing staple-crop yields and prices are of key importance. Further, remuneration of working hours increases in reaction to labour-supply shortages in rural areas. The accompanying rising incomes and non-agricultural job creation is less pro-poor than would be ideal, as they benefit more highly skilled workers. Further, shrinking farm sizes hampers poverty reduction and income-inequality reduction. Policies should target the participation of the poor in high-value (non-)agricultural activities, especially if positive trends in commodity prices are only transitory.

Keywords: Agriculture; Income distribution; Microsimulation-based decomposition; Peru; Rural poverty; Rural labour markets (search for similar items in EconPapers)
Date: 2018
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