An inclusive rural transformation in progress, but with unequal pace and characteristics across countries

Abstract

This analysis looks at the trends in the levels and pace of structural and rural transformation, and the degree of inclusiveness across Latin America and the Caribbean region (LAC), highlighting the disparities across countries. The analysis uses disaggregated poverty data from the United Nations Economic Commission for Latin America and the Caribbean (ECLAC) and internationally comparable poverty and other data from the World Bank, the World Development Indicators (WDI) from 1990 to 2017, for a set of 16 countries. Several results stand out. First, poverty in LAC has been falling since the early 2000s, but significant differences persist across countries and between rural and urban areas in each country. Second, by some measures, the pace of poverty reduction has slowed down in recent years. Accounting for population growth and rural-urban migration, the incremental numbers of people getting out of poverty vary widely across countries. Third, in spite of progress in the past two decades, inequality in LAC remains among the highest in the world, with the richest 10 percent concentrating significantly more income than the bottom 40 percent. The failure to improve shared prosperity jeopardizes poverty eradication efforts, particularly in face of the ongoing global economic slowdown that is also manifesting in LAC. Fourth, agricultural growth also shows fluctuations, but contrary to total GDP, it has rather accelerated in recent years. Fifth, structural and rural transformation are still well underway in most countries in the region. Starting on a relatively high level already in the mid-1990s, LAC continues to be the developing region with the highest degree of structural transformation. Likewise, the region is undergoing rural transformation, characterized by growing agricultural productivity and increased importance of the agrifood systems in the economies, in response to growing incomes in urban and rural areas, and to a broad diet transformation. Finally, with respect to the inclusive nature of the transformation process, this paper undertook an empirical analysis relying on simple correlations, and found that: (a) over time and for all poverty, inequality and shared prosperity measures, the process of rural transformation through increased agricultural labour productivity, results in statistically significant improvements in the region; (b) the strength of the association of rural transformation with the inclusion process was higher in the period 2007-2012, particularly with respect to extreme poverty. The correlation at higher poverty lines (moderate poverty) was further strengthened throughout the more recent period, which is consistent with a weakened relationship with reduced inequality in recent years; (c) the pace of rural transformation has had a stronger effect on the pace of poverty reduction in the first stage, between 2000-06 and 2007-12, but it weakened, during the most recent period between 2007-12 and 2013-16; and finally, (d) there is considerable difference across countries when it comes to the inclusive dimensions of rural transformation.