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Lagging regions and development strategies: The case of Peru

Author

Listed:
  • Thurlow, James
  • Morley, Samuel
  • Pratt, Alejandro Nin
Abstract
"Despite the economic transformation of Peru's coastal economy, the country's inland region remains poor and underdeveloped. We herein examine the economic linkages between the two regions using a multi-regional computable general equilibrium model based on a regionalized social accounting matrix. The model results show that coastal growth undermines the inland economy by increasing import competition and internal migration. Peru, therefore, cannot rely solely on rapid national growth to generate broad-based poverty reduction. When we simulate policies aimed at curbing divergence, we find that reducing interregional transaction costs stimulates national economic growth, but widens divergence by shifting inland production towards agriculture and concentrating investment in coastal manufacturing. In contrast, conditional cash transfers reduce regional and rural-urban inequality, but do not stimulate national growth. Finally, investing in inland productivity (through extension services and improved rural roads) reduces regional divergence, but the resulting market constraints worsen rural-urban inequality. These findings suggest that isolated interventions may worsen inequality, and that complementarities exist between supply-side investments and policies aimed at stimulating demand and improving access to national markets." from authors' abstract

Suggested Citation

  • Thurlow, James & Morley, Samuel & Pratt, Alejandro Nin, 2009. "Lagging regions and development strategies: The case of Peru," IFPRI discussion papers 898, International Food Policy Research Institute (IFPRI).
    • Handle: RePEc:fpr:ifprid:898
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    References listed on IDEAS

    as
    1. Shenggen Fan & Xiaobo Zhang, 2008. "Public Expenditure, Growth and Poverty Reduction in Rural Uganda," African Development Review, African Development Bank, vol. 20(3), pages 466-496.
    2. World Bank, 2005. "Peru : Opportunities for All, Peru Poverty Assessment," World Bank Publications - Reports 8809, The World Bank Group.
    3. Sonia Laszlo & Eric Santor, 2004. "Internal Migration and Borrowing Constraints: Evidence from Peru," Development and Comp Systems 0411022, University Library of Munich, Germany.
    Full references (including those not matched with items on IDEAS)

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    Keywords

    Regional development; Public investments; economic growth; Development strategies;
    All these keywords.

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