Neoliberal Reforms and Rural Poverty

Abstract

The experience of Mexico with neoliberal reforms began shortly after its suspension of debt repayments in 1982. The Mexican economy suffered greatly from the effects of the adjustment policies and external shocks that occurred in the early and mid1980s, but by the early 1990s moderate growth had returned and Mexico was viewed as a model of economic reform worthy of emulation by other nations. Even before the peso crisis of 1994, however, the high social costs associated with adjustment caused many critics to question Mexico's status as a model of reform. The decline in real wage rates and the reduction in expenditure on social services suggest that increased poverty may have been a consequence of the reforms. The performance of the agricultural sector was particularly poor, suggesting that poverty may have become even more widespread among agricultural households. This study seeks to determine if poverty did, in fact, increase among agricultural households during the period of the reforms. The empirical analysis raises questions about the distributional implications of neoliberal policies and the implications of neoliberal policy changes for sectors of the economy that previously relied heavily on public support. To examine the evolution of agricultural poverty over the period of the reforms, this study takes advantage of the existence of micro-level data on household income and expenditure from the Encuesta Nacional de IngresoGasto de los Hogares (National Household Income-Expenditure SurveyENIGH).' The existence of the ENIGH data offers an important advantage that most empirical studies on changes in the rate of poverty have not enjoyed. Most such studies have been forced to base their conclusions on inferences drawn from changes in per capita income or employment and wage rates in the formal sector. Drawing inferences in this way may well understate the change in poverty by ignoring changes in income distribution, changes in the informal sector, and changes in the distribution of income