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

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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.

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Abbreviations

ENAHO:

Encuesta Nacional de Hogares

INEI:

National Institute of Statistics and Informatics

OLS:

Ordinary Least Squares

PEN:

Peruvian Nuevo Sol

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Acknowledgements

We are particularly grateful to the editor Olivier Bargain and to two anonymous reviewers for their very useful comments, which enabled us to significantly improve this manuscript. All associated data used in this analysis can be downloaded at the webpage of the National Institute of Statistics and Informatics (INEI). We specifically used the Peruvian household survey data Encuesta Nacional de Hogares (ENAHO) which is available here: http://iinei.inei.gob.pe/microdatos/.

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Authors and Affiliations

  1. Department for Agricultural Economics and Rural Development, University of Göttingen, RTG 1666 GlobalFood, Heinrich-Düker-Weg 12, 37073, Göttingen, Germany

    Insa Flachsbarth

  2. GIGA Institut für Afrika-Studien, Neuer Jungfernstieg 21, 20354, Hamburg, Germany

    Simone Schotte & Jann Lay

  3. E.T.S. Ingeniería Agronómica, Alimentaria y de Biosistemas, Avda. Complutense s/n, 28040, Madrid, Spain

    Alberto Garrido

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  1. Insa Flachsbarth
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  2. Simone Schotte
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Correspondence to Insa Flachsbarth.

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Flachsbarth, I., Schotte, S., Lay, J. et al. Rural structural change, poverty and income distribution: evidence from Peru. J Econ Inequal 16, 631–653 (2018). https://doi.org/10.1007/s10888-018-9392-z

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