Date of Award

5-2019

Document Type

Open Access Thesis

Degree Name

Master of Arts (MA)

Department

Economics, Applied

First Advisor

Anne Fitzpatrick

Second Advisor

Randy Albelda

Third Advisor

Michael Carr

Abstract

In Nicaragua, poverty disproportionately affects the rural population. Over the last two decades, rural inhabitants have increased their participation in the Rural Non-Farm (RNF) sector. This study uses four waves of data from the Living Standard Measurement Survey (LSMS) between 2001 and 2014 to test whether the transition to the RNF sector decreases poverty rates and increases consumption. To account for the endogeneity of RNF participation and measures of well-being like consumption, I use an instrumental variables approach. I use a policy enacted in 2006 that induced plausibly exogenous variation in electrification rates over the same period to instrument for the RNF decision. Results suggest that an additional member of the household employed in the RNF sector increase household consumption by 17-25 percent and reduces the household’s likelihood to be in a poverty status by 15-21 percentage points.

These effects are greater among municipalities with higher levels of consumption prior to the electrification expansion, which implies that households engage in RNF taking advantage of the surrounding opportunities.

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