Jackeline Jiménez, Rafael Alvarado

Effect of Labor Productivity and Human Capital on Regional Poverty in Ecuador

The objective of this research is to examine empirically the relationship between labor productivity and human capital with regional poverty in Ecuador. In order to correct the bias caused by endogeneity and the omission of spatial dependence, we used regressions with instrumental variables and spatial econometric techniques. We estimated two sets of regressions. In the first, the dependent variable is the poverty rate and the independent variable is human capital. In the second, the poverty rate is a function of labor productivity. In both sets of models we include covariates associated with the social and economic characteristics of the regions. The results show that labor productivity and human capital can be public policy mechanisms to reduce poverty in less developed regions with spillover effects in neighboring regions.

Keywords: poverty; human capital; labor productivity; spatial econometrics

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