Human capital investment and long-term poverty reduction in rural Mexico

By focusing on human capital investment, the Mexican Oportunidades program will influence the economic choices of the rural poor. To understand how beneficiaries may alter their behaviour as a result of this intervention, this paper uses administrative data to analyze the economic activities of the Mexican rural poor. Results indicate that investments in education are likely to shift recipients from agricultural wage employment toward non-farm wage employment. The magnitude of this impact will be influenced by household assets and by the location of the household. The results suggest the need for policies that complement the government’s focus on human capital investment.