Growth in Guatemala: a mixed blessing for the poor

Type Journal Article
Title Growth in Guatemala: a mixed blessing for the poor
Publication (Day/Month/Year) 2009
One of the most important questions in development economics is: who benefits from economic growth? The present study attempts to answer this question, with regard to one country in particular: Guatemala. Some of the literature on this topic claims that its growth is not pro-poor, meaning it does not benefit individuals below the poverty line. Some of the variables held culpable for this phenomenon include the rise to power of an elite oligarchy that supposedly captures the benefits of growth. Others blame increasing inequalities in infrastructure, productive assets, opportunities and the like. But by observing data, especially that which has been collected since these studies were published, one can see that the malevolent oligarchs have actually done an excellent job of reducing poverty. However, some questions remain with regard the structure of this evidently pro-poor growth. The data suggest that growth occurs differently in different regions. Perhaps more alarming is the fact that when one lowers the poverty line, growth becomes non-pro-poor. And, finally, there is a period of non-pro-poor growth between 2000 and 2002. This paper first demonstrates the existence of this structure of growth, using data from years as recent as 2006 in the context of various mathematical tests of pro-poorness. It then suggests the variables that influence pro-poorness, including high relative inflation in consumer goods and changes in labor force activities and international commodity prices. Based on these conclusions as well as evaluations of past policies, this paper makes policy recommendations with the intent of fostering pro-poor growth in Guatemala.

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