Forgotten Effects Analysis Between the Regional Economic Activity of Michoacan and Welfare of Its Inhabitants

The creation of effective policies for the acceleration of economic, social and environmental development of regions is a demanding issue for government's agenda. Applying the Forgotten Effects Theory, this research aims to quantify the incidence of economic activity on the welfare level of citizens. In this paper we analyze 10 regions located in the Latin-American State of Michoacan, Mexico, each with different characteristics and specificities. Results show the relevant cumulative indirect effect that the primary sector has on family income and occupation. Manufacturing activities display high indirect cumulative effect on higher education and health. Construction and service sectors play a dominant role in environmental quality. This research presents a first step in order to release the nature of the problem and to show to what extent, in quantitative terms, the economic activity types influence welfare. This analysis could help decision makers for the effective allocation of resources and the creation of sustainable policies.