# **Introduction**

Though it endured traumatic economic, political, and natural shocks during the first decade of the century, Haiti managed to achieve modest success in poverty reduction: extreme poverty fell from 31 percent to 23.8 percent at the national level between 2000 and 2012.<sup>2</sup> Nonetheless, the country remains deeply impoverished, with an overall poverty headcount of 58.5 percent, the highest in the Latin America and Caribbean region. Though extreme poverty is found mainly in rural areas, where 80 percent of the extreme poor reside, more than 40 percent of urban dwellers are below the moderate poverty line.

Preliminary evidence suggests that the country’s small gains in poverty reduction in urban areas were linked to higher non-farm labor income, which rose in share of total income for all households except those in the poorest quintile. By contrast, households in rural areas saw income increases mainly from agricultural work and production for home consumption, reflecting a growing reliance on the historically low-performing agricultural sector (World Bank, 2014a).

Human capital is typically the most abundant asset of poor households and labor income their main source of income (Attanasio and Székely, 1999, and Bussolo and Lopez-Calva, 2014). Furthermore, mounting empirical evidence suggests that the main driver of poverty and inequality reduction in the world during the last decade was rising labor income, with more and better-paying jobs explaining most of the gains achieved across the developing world, particularly in Latin America and the Caribbean (Azevedo et al., 2013a, Azevedo et al., 2013b, and World Bank, 2014b). Labor markets have been the main channel through which growth reduced poverty in LAC since 2003. Higher labor income accounted for 58 percent of the overall LAC reduction in poverty in 2003-2008 and 49 percent in 2008-2013.<sup>3</sup> For that reason, if Haiti is to reach its goal of becoming an emerging country by 2030, it would do well to work toward significant improvements in its labor market and income generation for its citizens.

In Haiti today, jobs are both scarce and of low quality. Unemployment is high across the country. Having a job, however, is no guarantee of escaping poverty: even though the majority of the poor work, their earnings are insufficient to lift them out of poverty, particularly if they are working in the primary sector. Almost 70 percent of the heads of poor households have jobs (compared to 73 percent of the non-poor). Opportunities and outcomes are unequally distributed: unemployment is particularly high among women and young people, and women earn over 30 percent less than men even after controlling for observable characteristics (World Bank, 2014a) such as educational attainment and sector of employment.

While an important amount of the research on Haiti since 2010 has focused on the impact of the earthquake, five years on this question may be one more interesting to researchers than to inform policies and programs beyond the reconstruction. Attempting to contribute to the latter, the paper takes a longer term perspective

> 2 Poverty numbers for 2012 are based on per capita consumption and were calculated using the 2012 official moderate and extreme poverty lines of  HTG 81.7 per capita per day ($2.41 PPP of 2005) and HTG 41.6 per capita per day ($1.23 PPP of 2005), respectively. The 2000 poverty rates are from the Fafo Institute for Applied International Studies (2001), based on the IHSI _Enquête Budget et Consommation des Ménages_ 1999/2000 (EBCM 1999/2000). For details on methodology and comparability of estimates, see World Bank (2014a).

> 3 Using SEDLAC. The estimation uses the methodology introduced by Barros et al. (2006) and Azevedo, Sanfelice, and Cong Nguyen (2012), it is possible to isolate the role played by different income sources in reducing poverty

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