The Negative Impact of Structural Adjustment on Sectoral Earnings in Nicaragua

Abstract

Nicaragua instituted structural adjustment (SA) policies wholeheartedly after the electoral defeat of the Sandinistas in 1990. Using two comprehensive national surveys from 1993 and 1998 (which corresponds to the period of initiation and deepening of SA policies in Nicaragua), this article seeks to determine the impact of SA policies on sectoral earnings. The present research suggests that both informal and formal sector workers suffered a decline in earnings, yet the brunt of the earnings drop affected informal workers and women the most. In addition, the size of the informal sector increased dramatically throughout the 1990s. Together, the surge in informal activity and the decline in sectoral earnings suggest that SA policies in Nicaragua have failed. Nonetheless, those who live in urban areas with high levels of education have been the most able to avoid the greatest costs associated with SA policies. JEL classification: O17; J31; O19; O54

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