The poor in Latin America during adjustment : a case study of Peru
Glewwe, Paul | De Tray, Dennis
This paper provides a general overview of the effects of structural adjustment programs on the poor. It turns to a specific country setting, Peru, as a means of illustrating the discussion. The depth of Peru's economic problems makes it likely that the Peruvian economy will have to undergo major adjustments in the near future. Among the options policy makers will consider are : realignment of the various exchange rates, trade liberalization, removal of price distortions, and reduction of government expenditures. The analysis presented here shows how household level data can be used to assess the effect of various policy options on the welfare of the poor. Several facts suggest that correcting many of the distortions affecting Peru's agricultural sector may not directly harm the poor. For Peru's urban sector, the case is more complicated. If food subsidies and taxes were dropped, the net (immediate) effect may well be favorable as the prices of wheat and wheat products, a major staple, would decline substantially. Other government programs, including those related to health and education, could be changed in ways that would benefit the poor, and in some cases, reduce overall public sector expenditures.
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