The Effects of Economic Adjustment on Poverty in Mexico

Abstract

This study examines how the poor were affected during the period of economic adjustment in Mexico in the 1980s and early 1990s. The experience of Mexico with adjustment began shortly after its suspension of debt repayments in 1982. The Mexican economy initially suffered greatly from the effects of the adjustment policies and external shocks, but by the early 1990s, moderate growth had returned and Mexico was viewed as a model of economic reform. However, the high social costs associated with adjustment caused many critics to question the status of Mexico as a model of reform. This study seeks to determine if poverty did, in fact, increase during the adjustment period. The question of the effect of economic adjustment on poverty is an important one in the literature of economic development, as most Latin American and Sub-Saharan African Countries underwent some type of economic adjustment over the course of the 1980s and 1990s. After examining the most promising theoretical arguments for why economic adjustment should be associated with increased poverty, this study examines the evolution of poverty rates in Mexico using a series of income-expenditure surveys which were administered during the adjustment period. As such, it offers an important new contribution to the literature on the effects of adjustment on the poor. In addition to offering new insights into the results of the Mexican case, it will be of interest to scholars hoping to anticipate the likely effects of the current economic reforms being instituted in Asia.