Why does poverty persist in Latin America's emerging economies? A spatial econometrics application for the Colombian case

​Abstract

This paper examines two hypothesis regarding poverty persistence in Latin America: (i) poverty has persisted in the last two decades in most countries in Latin America, including Colombia; and (ii) the spatial dependence among the political administrative units explains this phenomenon. The testing strategy consists of providing evidence for an emerging economy like Colombia and for that, the monetary poverty data between 1997-2016 are analyzed for the 23 main departments (administrative units) and its capital, Bogotá. A General Nesting Spatial Model by panel data is estimated to examine the degree of association of two components: economic growth and income distribution. I estimate this relationship controlling for variables such as unemployment and murder rates, and two measures of conflict, in order to know if they are consistent drivers of poverty when spatiality is involved. The results confirm the hypothesis of persistence of poverty, since the analysis of beta and sigma convergence suggests that it takes 28.7 years for the poverty gaps to be reduced by half in Latin America, and 30.3 years for Colombia. I also find positive effects of economic growth and income distribution on the reduction of monetary poverty. Likewise, murder and unemployment rates as well as conflict explain the persistence of poverty.

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