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STRUCTURAL OR CONJUNCTURAL CHANGES TO REDUCE POVERTY IN ECUADOR?

Abstract:

This article examines the different determinants of poverty and extreme poverty, emphasizing long- and short-term changes in policies to address social disparities. We identify several conjunctural factors important for socioeconomic divergences, which are a focus of policymakers in the region. These factors are employed as a strategy for gaining people's support because of their easy implementation and short-run effectiveness. However, in many cases, the factors have shown no effect in the long term. In contrast, we suggest other determinants that have shown success when used, termed structural changes. In most cases, these determinants are costly and hard to implement. However, they often have concrete and lasting repercussions. We use a fixed-effect model of various structural and conjunctural factors that may determine the levels of poverty in a country and compare the model results to identify the effectiveness of short-term policies and long-term structural changes. Our results suggest that in Ecuador, conjunctural changes such as an increased minimum wage have had an impact on reducing poverty. In addition, we find that structural factors, such as human capital and labor market structure, have a larger impact when defining poverty and extreme poverty, implying the importance of structural reforms for larger and lasting reductions in poverty levels.