What makes the poor stay poor? Poverty dynamics in Peru

Mario Huarancca, Luis Castillo and Renzo Castellares
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Mario Huarancca: Banco Central de Reserva del Perú

No 2023-013, Working Papers from Banco Central de Reserva del Perú

Abstract: This paper investigates the dynamics of monetary poverty in Peru between 2015 and 2022, with a particular focus on the impact of the COVID-19 pandemic. Using panel data from the National Household Survey (ENAHO), we examine three key questions: the extent of poverty persistence, household characteristics associated with an increase in the probability of being poor, and changes in poverty dynamics following the pandemic. Our analysis employs transition matrices and probit regression techniques, offering a comprehensive exploration of these dynamics. Our main findings highlight the enduring nature of poverty in Peru, with over half of impoverished households remaining in poverty the subsequent year. The pandemic-induced economic shocks led to a transient surge in poverty persistence to 60% between 2019 and 2020. Additionally, five-year intervals show increased poverty persistence in the 2018-2022 period, suggesting heightened economic vulnerability after the pandemic. We find that demographic, social, and economic factors correlate with poverty persistence. Households led by females or older individuals exhibit lower persistence, while the presence of children, lack of access to health insurance, and informality are linked to higher poverty persistence. Probit regression analysis confirm the protective effect of education, and how the influence of natural hazard events, the demographic dependence in the household, and precarious jobs increases the probability of being poor.

Keywords: Poverty; Peru; Persistence; Dynamics; Probit (search for similar items in EconPapers)
JEL-codes: I32 O54 (search for similar items in EconPapers)
Date: 2023-12
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