Agricultural Growth and Poverty Reduction: The Case of Mexico

Poverty levels have been diminishing in Mexico since the late 90's, although several regions still show high levels of poverty, and they are extremely high in some rural areas. This paper have addressed the issue of the linkages between sectoral growth (urban/rural) and poverty levels. It was found that although both types of growth impacted negatively on poverty levels in Mexico, rural growth seems to have a higher power in improving consumption per capita of the poorest among the poor people. Moreover, 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 rural growth enhances equality of income distribution at total and urban levels, while urban growth does exactly the opposite. But this is still a general equilibrium effect. Thus, we further explored labor market issues. We found that rural growth impacted positively on labor demand for unskilled worker: on this base, ceteris paribus it is better for poverty alleviation to have rural growth. We have also explored the issue of relative prices, although no impact of rural/urban growth was found here. Everything seems to be driven by the real exchange rate behavior. 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.