Regional Poverty Dynamics in Peru: The Role of Growth and Inequality Recent Evidence

Abstract: In the last decades Peru experienced an unprecedented reduction in poverty amid a strong and sustainable economic rebound following structural reforms introduced in the 1990s which paralleled a downtrend in income inequality. Using microdata from the National Survey of Households (ENAHO) this study formally tests the simultaneous role of growth and inequality on poverty outcomes from 2007 to 2019. Unlike previous research for the country, it focuses on regional poverty dynamics highlighting the implications of regional idiosyncrasies and how they interplayed with the variables studied. It further looks at how growth and inequality affected the poor from a spatial dimension, that is, considering the marked differences between rural and urban poverty within regions. The main finding is that growth strongly accounts for most of the poverty reduction observed in the country during the period investigated by increasing the incomes of the poor. By contrast, the role of inequality was uncertain and heavily dependent on the specification of the sample used. In the poorest regions and rural areas, income disparities restrained the power of growth for poverty alleviation. There, lack of access to essential public services amplified the unpleasant effects of inequality.