Urban poverty and labor market dynamics in five Latin American countries: 2003–2008

Abstract

Latin America experienced a long period of sustained growth since 2003 that positively impacted social and labor market indicators, including poverty. This paper contributes to the understanding of this process as it carries out a comparative study of poverty dynamics in five Latin American countries during 2003–2008. It analyzes the extent to which countries with different levels of poverty incidence diverge in terms of poverty exit and entry rates, identifies the relative importance of the frequency and impact of events associated to poverty transitions and examines how these events affect households with different characteristics. For this, a dynamic analysis of panel data is carried out using regular household surveys. Sizeable rates of poverty movements were observed in all five countries and it was found that a large proportion of household experienced positive events, mainly related to the labor market; however, only a small fraction of them actually exited poverty. Demographic events and public cash transfers proved to be of little relevance; in particular, the latter did not contribute much either to intensify poverty exits or to prevent poverty entries. Households with children experienced more (less) negative (positive) events than those without children. It appeared therefore that even when the economy behaved reasonably well at the aggregate level, high levels of labor turnover and income mobility (even of a negative nature) still prevail, mainly associated to the high level of precariousness and the undeveloped system of social protection that characterize the studied countries.