Effect of the Structure of Rural Public Expenditures on Agricultural Growth and Rural Poverty in Latin America

Dec 2004
This working paper empirically documents the size of (2) in the rural sector and investigates its consequences for rural development (agricultural growth, patterns of growth and rural poverty) for ten Latin American countries over 1985-2000. The paper provides econometric evidence suggesting that the structure of public expenditures is an important factor of economic development. The quantitative importance of this factor appears to be greater than the traditional factors on which the development literature focuses. In particular, expanding total public expenditures in rural areas while maintaining the existing public expenditure composition prevailing in the countries does little to promote agricultural income and reduce rural poverty.