Economic Reform in Developing Countries
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Economic Reform in Developing Countries

Reach, Range, Reason

Edited by José María Fanelli and Lyn Squire

This book offers insights into the process of economic reform in developing countries. It is organized around three factors that are critical to the success of any reform. According to Nobel Laureate Amartya Sen, these key dimensions are Reach, Range, and Reason. ‘Reach’ refers to the ability of reform to be person-centered and evenhanded, reaching all individuals in society. ‘Range’ considers the institutional reforms and policy changes necessary to implement change and the possible ripple effects on other policies and populations. Finally, ‘Reason’ captures the importance of constantly asking why a particular reform has been selected.
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Chapter 3: Market Failures in Human Development: The Intergenerational Poverty Trap in Mexico

David Mayer-Foulkes


David Mayer-Foulkes Health and education investment in Mexico are subject to barriers which create a long-term intergenerational poverty trap which slows economic growth. Specifically, a major portion of the population cannot tap into the increasing returns from investment in education. The role of health is twofold: first, early child health and nutrition are strongly associated with the probability of obtaining a higher education later in life, over and beyond parental education, income and wealth. Second, adult health contributes to adult income. However, the returns from policies for improving early child development are large enough to help overcome the barriers to investment in higher education, and therefore to overcome the human development trap. This chapter illustrates the two dimensions of Amartya Sen’s notion of ‘reach’ using the specific case of Mexico. First, it is ‘person-related’ in that it demonstrates the benefits of early child development for future educational attainment and income-earning capability. The second element of reach, inclusiveness, implies that reforms must be conceived in a manner which explicitly accounts for the poor and the barriers they face. In one of the few empirical investigations of the poverty trap, this study shows that increasing returns to adult education hold especially at higher educational levels in Mexico. However, lower-income households rarely attain these levels, pointing to the presence of a poverty trap. When human development traps are present, economic forces do not lead to social integration but generate distinct social classes instead. Unlike past efforts, future reforms must expand their range to...

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