Poverty and Economic Growth in Mexico

Research output: Contribution to journalArticle

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Abstract

The relationship between poverty and economic growth has been widely discussed in the economic development literature during the past few decades. However, most of this research has been based on cross-sectional studies and very few studies have used time-series techniques to analyze this important issue. At the same time, there are also only a few studies analyzing this issue for the case of Mexico. Therefore, the objective of this paper was to analyze the relationship between poverty and economic growth in Mexico, using a cointegration analysis with structural change for the period 1960–2016. The Gregory-Hansen cointegration test confirmed the existence of a long-term equilibrium relationship between poverty reduction and economic growth, both in the short run and in the long run. Using a Vector Error Correction Model (VECM), we find that, in the long run, a 1% increase in economic growth leads to a 2.4% increase in per capita consumption (and therefore poverty reduction). This estimate is similar to those obtained in other studies for the case of Mexico and for other developing countries. Also, using the Granger causality test, it was found that there is a bidirectional causality relationship between poverty reduction and economic growth in Mexico.
Original languageEnglish
Article number183
Pages (from-to)183
Number of pages9
JournalSocial Sciences
Volume7
Issue number10
DOIs
Publication statusPublished - 30 Sep 2018

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economic growth
Mexico
poverty
causality
cross-sectional study
structural change
time series
developing country
economics

All Science Journal Classification (ASJC) codes

  • Social Sciences(all)

Cite this

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abstract = "The relationship between poverty and economic growth has been widely discussed in the economic development literature during the past few decades. However, most of this research has been based on cross-sectional studies and very few studies have used time-series techniques to analyze this important issue. At the same time, there are also only a few studies analyzing this issue for the case of Mexico. Therefore, the objective of this paper was to analyze the relationship between poverty and economic growth in Mexico, using a cointegration analysis with structural change for the period 1960–2016. The Gregory-Hansen cointegration test confirmed the existence of a long-term equilibrium relationship between poverty reduction and economic growth, both in the short run and in the long run. Using a Vector Error Correction Model (VECM), we find that, in the long run, a 1{\%} increase in economic growth leads to a 2.4{\%} increase in per capita consumption (and therefore poverty reduction). This estimate is similar to those obtained in other studies for the case of Mexico and for other developing countries. Also, using the Granger causality test, it was found that there is a bidirectional causality relationship between poverty reduction and economic growth in Mexico.",
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Poverty and Economic Growth in Mexico. / Garza-Rodriguez, Jorge.

In: Social Sciences, Vol. 7, No. 10, 183, 30.09.2018, p. 183.

Research output: Contribution to journalArticle

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