Economic Shocks, Inequality and Poverty: The Need for Safety Nets

Jun 1998
This discussusion paper deciphers how poverty and income distribution were affected by economic shocks in the Latin American region. Empirical evidence suggests that macroeconomic shocks can result in substantial increases in inequality and poverty. Latin America has experienced two major crises in the last 15 years. In the 1980s, Mexico's debt crisis spread throughout Latin America on the back of trade shocks and weak public finances. In 1995, Mexico's liquidity crisis, spread only to Argentina. This paper was prepared for the IDB "Conference on Social Protection and the Poor," held in Washington, D.C., on February 4th-5th, 1999.