TextHmwk2_07_answers

TextHmwk2_07_answers - Econ 171-EEP 151 Fall 2007 Alain de...

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Econ 171-EEP 151 Alain de Janvry Fall 2007 Melissa Hidrobo and Lourdes Rodriguez Homework #2 Guatemala Poverty and Inequality Assessment The World Bank and national governments periodically conduct household surveys to do country poverty and inequality assessments. These surveys are called Living Standards Measurement Surveys (LSMS). Details on these surveys are available at http://www.worldbank.org/lsms/ . In 2000, an LSMS was conducted for Guatemala. This is one of the Latin American countries with a great deal of poverty, high inequality, and sharp contrasts between rural vs. urban and between indigenous vs. non-indigenous populations. You are asked to characterize poverty and inequality in Guatemala, with particular emphasis on heterogeneity between rural/urban and indigenous/non-indigenous populations. The objective of your analysis is to make recommendations to the Government of Guatemala (GoG) as to how to target its efforts to reach the Millennium Development Goal of halving extreme poverty (MDG#1). 1. World Bank’s Guatemala Poverty Assessment 2000 (worth 2 points) The World Bank’s Guatemala Poverty Assessment 2000 is available at: http://wbln0018.worldbank.org/LAC/LACInfoClient.nsf/Date/By+Author_Country/EEB A795E0F22768D85256CE700772165?OpenDocument Look at the Executive Summary. In not more than one page indicate: 1.1. What are the main aspects of poverty in Guatemala? Points taken from the executive summary: Poverty in Guatemala is high and deep. In 2000, over half of all Guatemalans – 56% or about 6.4 million people – lived in poverty. About 16% lived in extreme poverty. Although poverty has fallen over the past decade, it has increased in recent years . Poverty is estimated to have fallen from about 62% in 1989 to 56% in 2000. This drop is slightly slower than what would have been predicted given Guatemala’s growth rates, suggesting that growth has not been particularly “pro-poor.” This pattern arises largely because growth in the rural sectors – where the poor are largely concentrated – has been slower than in other areas. Poverty and vulnerability are mainly chronic, not transient. While 56% of Guatemala’s population lived in poverty in 2000, the majority of these (79%) were chronically poor, whereas only a fifth were transient poor. Poverty is predominantly rural, and higher among the indigenous. Over 81% of the poor and 93% of the extreme poor live in rural areas. Poverty is also significantly higher among the indigenous (76% are poor) as compared with the non-indigenous population (41% are poor). There is a significant “poverty belt” in the Northern and North- Western Regions. 1 5/13/09
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1.2. What are the main policy recommendations made by the Assessment to reduce poverty in Guatemala? (1) Promoting economic growth. • Maintaining macroeconomic stability; • Enforcing a tight fiscal position, with a careful plan for strengthening tax collection and redirecting public spending towards the social sectors so as to build assets that are crucial to both growth and poverty reduction;
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