IMPACT OF MEXICO'S SOCIAL PROGRAMS ON POVERTY

Do the major social programs in Mexico decrease poverty? By how much? Are they sufficient to procure a country with no poverty? We approach these questions employing an extraction exercise on a linear general equilibrium model to estimate the poverty that would prevail in the case that Oportunidades, Procampo and Adulto Mayor were eliminated at once. The model is constructed with two key distinctive features: The marginal propensities to consume are derived from a Quadratic Almost Ideal Demand System allowing heterogeneous income elasticities among sectors, and labor income of non-wage workers, self-employed and employers are imputed to improve the measurement of labor contribution given the wide presence of informality in Mexico. Our estimates suggest the three programs contribute to a reduction of 9% in the head-count poverty measure. However, at this level, it would be necessary to scale the programs 8 times to achieve the World Bank's 2030 poverty goals.