<p>High poverty rates are generally a result of two factors</p>

<p>A) Low per capita income (GDP / capita)</p>

<p>B) High inequality (frequently measured as the Gini coefficient)</p>

<p>There are multiple potential reasons for any country's income level and degree of inequality (not just for Mexico's). Moreover, one can decompose your question into two.</p>

<p>1) What makes some countries (in general) richer than others?</p>

<p>2) Is Mexico poorer because of some Mexico-specific factors?</p>

<p>The answer to the first question is kind of the Holy Grail of empirical economics, and if any single economist had been able to answer that he would have definitely won a Nobel prize. The consensus view is that there are different factors contributing to cross-country differences in income. Literacy and education, which you mentioned (and which fit into the economists' definition of Human Capital) are mostly likely a key factor. However, another one which appears to be particularly important to Mexico's case is the quality of a country's economic and political institutions. See below a highly recommended reading from an economist who's likely to win a Nobel for growth theory, which in his very readable book frequently uses Mexico as a case-in-point for his theory.</p>

<p><a href="http://whynationsfail.com/blog/2013/10/29/what-are-institutions.html" rel="nofollow noreferrer">http://whynationsfail.com/blog/2013/10/29/what-are-institutions.html</a></p>

CC BY-SA 3.0
2017-12-21T10:22:00.080Z
2017-12-21T10:22:00.080Z
bbecon
<p>It is common that very poor countries also have very low unemployment rates. </p>

<p>A typical reason for this is that a large share of the population can always engage in subsistence agriculture, in which case they are both employed and also poor. However, despite the presence of near-subsistence agriculture in some regions, Mexico is a middle income country and not a "very poor" country, so without looking deeply into the data I would not assume this to explain even close to all of the observation.</p>

<p>It could also be related to a) how poverty is defined and the effects that income inequality can have in the context of the specific definition (e.g., a large share of the population earning less than 1/2 of mean or median income, but still able to access basic housing, nutrition, communications, education and health services), b) the minimum wage, for example if it is very low you might have a lot of people working but at a very low wage (consider this in an ideologically neutral sense, since even if literate this does not necessarily imply that skills matching in the labour market can "handle" a higher minimum wage), c) whether a national poverty rate is applied to areas where housing expectations are met at a much lower cost compared to the capital city (or any other major cost differentials that are not adjusted for due to using a national poverty line instead of adjusting for regional cost variations), ... </p>

<p>Also, consider that the stats are usually for market income, without imputing the value of public services such as health and education. This is among some variety of reasons to prefer consumption indicators of wellbeing instead of market income, despite the shortcoming that there is always some subjective element in the evaluation. </p>

CC BY-SA 3.0
2018-03-21T22:07:02.363Z
If you don't know, please don't speculate. If you're not going to dig deeply into the data, please don't speculate. If you're not going to provide directly-relevant references, please don't speculate.
410 gone
CC BY-SA 3.0
2018-03-21T23:15:47.707Z
OK, now, this is important: if you don't want to provide a good answer, and/or you aren't able to, then simply don't answer. Really. Please. For the good of the site.
410 gone
CC BY-SA 3.0
2018-03-22T16:03:47.510Z
There is a large diversity of methods to respond to each relevant aspect. If you would like to improve upon the answer by arguing in favour of specific methods as opposed to others, please feel free to do so.
nathanwww
CC BY-SA 3.0
2018-03-21T22:02:38.267Z
2018-03-21T22:02:38.267Z
nathanwww
<p>According to various sources (source listed in parentheses):</p>

<ul>
<li>Mexico's unemployment rate is 3.3% (Trading Economics)</li>
<li>Mexico's literacy rate is 94.5% (Statistica)</li>
<li>Mexico's upper secondary graduation rate is 49% (OECD estimate)</li>
</ul>

<p>Yet, when I look at the poverty rate for Mexico, the <a href="https://www.reuters.com/article/us-mexico-poverty/mexican-government-says-poverty-rate-rose-to-46-2-percent-in-2014-idUSKCN0PX2B320150723" rel="nofollow noreferrer">poverty rate is 46.2%, according to Reuters</a>.  Mexico has low unemployment and a high rate of education, yet almost half of its population is in poverty.  What's the cause of this?</p>

CC BY-SA 3.0
2017-12-21T13:59:49.623Z
Corruption is a big part of the equation.
Hot Licks
CC BY-SA 3.0
2018-03-21T13:17:00.170Z
Because of the higher poverty income limits in cities, urbanisation might actually increase poverty according to the given poverty criteria.
Klas Lindbäck
CC BY-SA 3.0
2018-03-22T08:41:41.083Z
Examine the other factors that are necessary for high gdp/capita, e.g. capital, infrastructure, taxes, corruption.
Klas Lindbäck
<poverty>
What's the Cause of Mexico's Poverty Rate?
WhyIsMexicoPoor
# What's the Cause of Mexico's Poverty Rate?

(Asked by: username_0 on 2017-12-18)

According to various sources (source listed in parentheses):

* Mexico's unemployment rate is 3.3% (Trading Economics)
* Mexico's literacy rate is 94.5% (Statistica)
* Mexico's upper secondary graduation rate is 49% (OECD estimate)

Yet, when I look at the poverty rate for Mexico, the [poverty rate is 46.2%, according to Reuters](https://www.reuters.com/article/us-mexico-poverty/mexican-government-says-poverty-rate-rose-to-46-2-percent-in-2014-idUSKCN0PX2B320150723). Mexico has low unemployment and a high rate of education, yet almost half of its population is in poverty. What's the cause of this?

**Tags:** poverty

> **Comments:**
> **username_1**: Corruption is a big part of the equation.  
> **username_2**: Because of the higher poverty income limits in cities, urbanisation might actually increase poverty according to the given poverty criteria.  
> **username_2**: Examine the other factors that are necessary for high gdp/capita, e.g. capital, infrastructure, taxes, corruption.  

---

## 2 answers

### Answer by username_3 on 2017-12-21. Score: 3

High poverty rates are generally a result of two factors

A) Low per capita income (GDP / capita)

B) High inequality (frequently measured as the Gini coefficient)

There are multiple potential reasons for any country's income level and degree of inequality (not just for Mexico's). Moreover, one can decompose your question into two.

1) What makes some countries (in general) richer than others?

2) Is Mexico poorer because of some Mexico-specific factors?

The answer to the first question is kind of the Holy Grail of empirical economics, and if any single economist had been able to answer that he would have definitely won a Nobel prize. The consensus view is that there are different factors contributing to cross-country differences in income. Literacy and education, which you mentioned (and which fit into the economists' definition of Human Capital) are mostly likely a key factor. However, another one which appears to be particularly important to Mexico's case is the quality of a country's economic and political institutions. See below a highly recommended reading from an economist who's likely to win a Nobel for growth theory, which in his very readable book frequently uses Mexico as a case-in-point for his theory.

<http://whynationsfail.com/blog/2013/10/29/what-are-institutions.html>


---

### Answer by username_4 on 2018-03-21. Score: -1

It is common that very poor countries also have very low unemployment rates.

A typical reason for this is that a large share of the population can always engage in subsistence agriculture, in which case they are both employed and also poor. However, despite the presence of near-subsistence agriculture in some regions, Mexico is a middle income country and not a "very poor" country, so without looking deeply into the data I would not assume this to explain even close to all of the observation.

It could also be related to a) how poverty is defined and the effects that income inequality can have in the context of the specific definition (e.g., a large share of the population earning less than 1/2 of mean or median income, but still able to access basic housing, nutrition, communications, education and health services), b) the minimum wage, for example if it is very low you might have a lot of people working but at a very low wage (consider this in an ideologically neutral sense, since even if literate this does not necessarily imply that skills matching in the labour market can "handle" a higher minimum wage), c) whether a national poverty rate is applied to areas where housing expectations are met at a much lower cost compared to the capital city (or any other major cost differentials that are not adjusted for due to using a national poverty line instead of adjusting for regional cost variations), ...

Also, consider that the stats are usually for market income, without imputing the value of public services such as health and education. This is among some variety of reasons to prefer consumption indicators of wellbeing instead of market income, despite the shortcoming that there is always some subjective element in the evaluation.

> **Comments:**
> **username_5**: If you don't know, please don't speculate. If you're not going to dig deeply into the data, please don't speculate. If you're not going to provide directly-relevant references, please don't speculate.  
> **username_5**: OK, now, this is important: if you don't want to provide a good answer, and/or you aren't able to, then simply don't answer. Really. Please. For the good of the site.  
> **username_4**: There is a large diversity of methods to respond to each relevant aspect. If you would like to improve upon the answer by arguing in favour of specific methods as opposed to others, please feel free to do so.  

---

