Perera, Liyanage Devangi H. and Lee, Grace H.Y. (2013): Have economic growth and institutional quality contributed to poverty and inequality reduction in Asia? Published in: Journal of Asian Economics , Vol. August, No. 27 (2013): pp. 71-86.
Preview |
PDF
MPRA_paper_52763.pdf Download (655kB) | Preview |
Abstract
While economic growth has been cited as one of the main factors behind the reduction in absolute poverty, the persisting problem of poverty in developing countries has raised doubts about the efficacy of economic growth in its reduction. Recent evidence revealed that growth in Asia has been accompanied by an increase in relative poverty, or income inequality. High income inequality can slow the rate of poverty reduction, and create social unrest and anxiety. The quality of institutions may also influence the extent to which economic growth reduces poverty. This study examines the effects of economic growth and institutional quality on poverty and income inequality in nine developing countries of Asia for the period 1985-2009. The System Generalized Method of Moments (GMM) estimation method is employed to estimate the equations. While economic growth does not appear to have an effect on income inequality, the results confirm that such growth leads to poverty reduction. Although improvements in government stability and law and order are found to reduce poverty, improvements in the level of corruption, democratic accountability, and bureaucratic quality appear to increase poverty levels. Similarly, the results also show that improvements in corruption, democratic accountability, and bureaucratic quality are associated with a worsening of the income distribution. This study recommends that measures taken to improve the level of institutional quality in developing countries of East and South Asia should address the problems of poverty and income distribution, while adopting policies to support informal sector workers who may be affected by institutional reform.
Item Type: | MPRA Paper |
---|---|
Original Title: | Have economic growth and institutional quality contributed to poverty and inequality reduction in Asia? |
Language: | English |
Keywords: | income inequality, poverty, growth, institution quality |
Subjects: | D - Microeconomics > D3 - Distribution I - Health, Education, and Welfare > I3 - Welfare, Well-Being, and Poverty O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development |
Item ID: | 52763 |
Depositing User: | Dr Grace Hooi Yean Lee |
Date Deposited: | 09 Jan 2014 12:45 |
Last Modified: | 26 Sep 2019 16:37 |
References: | [1] R.H. Adams Jr., Economic growth, inequality and poverty: Estimating the growth elasticity of poverty, World Dev. 32 (2004) 1989-2014. [2] A.M. Balisacan, E.M. Pernia, A. Asra, Revisiting growth and poverty reduction in Indonesia: What do subnational data show?, Bull. Indones. Econ. Stud. 39 (2003) 329-351. [3] D. Dollar, A. Kraay, Growth is good for the poor, J. Econ. Growth. 7 (2002) 195-225. [4] A. Kraay, When is growth pro-poor? Evidence from a panel of countries, J. Dev. Econ. 80 (2006) 198-227. [5] M. Ravallion, Growth, inequality and poverty: Looking beyond averages, World Dev. 29 (2001) 1803-1815. [6] M. Ravallion, S. Chen, China’s (uneven) progress against poverty, J. Dev. Econ. 82 (2007) 1-42. [7] S. Kuznets, Economic growth and income inequality, Am. Econ. Rev. 45 (1955) 1-28. [8] S. Anand, S.M.R. Kanbur, Inequality and development: A critique, J. Dev. Econ. 41 (1993) 19-43. [9] R. Ram, Level of development and income inequality: An extension of Kuznets-Hypothesis to the world economy, Kyklos. 42 (1989) 73-88. [10] Asian Development Bank [ADB], Asian Development Outlook 2012: Confronting rising inequality in Asia (2012). [11] R.H. Wade, Is globalization reducing poverty and inequality?, World Dev. 32 (2004) 567-589. [12] M. Ravallion, A comparative perspective on poverty reduction, Policy Research Working Paper 5080 (2009). [13] R.J. Barro, Inequality and growth in a panel of countries, J. Econ. Growth. 5 (2000) 5-32. [14] A. Chong, C. Caldéron, Institutional quality and poverty measures in a cross-section of countries, Econ. Gov. 1 (2000b) 123-135. [15] A. Chong, M. Gradstein, Inequality and institutions, Rev. Econ. Stat. 89 (2007) 454-465. [16] E. Tebaldi, R. Mohan, Institutions and poverty, J. Dev. Stud. 46 (2010) 1047-1066. [17] R. Hasan, D. Mitra, M. Ulubasoglu, Institutions and policies for growth and poverty reduction: the role of private sector development, Asian Dev. Rev. 24 (2007) 69-116. [18] X. Sala-i-Martin, 15 years of new growth economics: What have we learnt?, Central Bank of Chile Working Paper 172 (2002), Banco Central de Chile, Santiago. [19] A. Chong, C. Caldéron, Institutional quality and income distribution, Econ. Dev. Cult. Change. 48 (2000a) 761- 186. [20] P. Keefer, S. Knack, Why don’t poor countries catch up? A cross-national test of an institutional explanation, Econ. Inq. 35 (1997) 590- 601. [21] A.R. Andres, C. Ramlogan-Dobson, Is corruption really bad for inequality? Evidence from Latin America, J. Dev. Stud. 47 (2011) 959-976. [22] World Bank, Global Economic Prospects 2009: Commodities at the Crossroads (2008). [23] R.H. Adams Jr., Economic growth, inequality and poverty: Findings from a new data set, Policy Research Working Paper 2972 (2003). [24] M. Ravallion, S. Chen, What can new survey data tell us about recent changes in distribution and poverty?, World Bank Econ. Rev. 11 (1997), 357-382. [25] A.K. Fosu, The effect of income distribution on the ability of growth to reduce poverty: Evidence from rural and urban African economies, Am. J. Econ. Sociol. 69 (2010) 1034-1053. [26] S. Bhalla, Imagine there’s no country: Poverty, inequality, and growth in the era of globalization, Institute for International Economics, Washington D.C., 2002. [27] F. Fanta, M.P. Upadhyay, Poverty reduction, economic growth and inequality in Africa, Appl. Econ. Lett. 16 (2009) 1791-1794. [28] R. Ram, Growth elasticity of poverty: direct estimates from recent data, Appl. Econ. 43 (2011) 2433-2440. [29] R. Eastwood, M. Lipton, Pro-poor growth and pro-growth poverty reduction: What do they mean? What does the evidence mean? What can policymakers do?, Asian Dev. Rev. 19 (2001) 1-37. [30] J.A. Donaldson, Growth is good for whom, when, how? Economic growth and poverty reduction in exceptional cases, World Dev. 36 (2008) 2127-2143. [31] S. Basu, S. Mallick, When does growth trickle down to the poor? The Indian case, Cambridge J. Econ. 32 (2008) 461-477. [32] A. Suryahadi, D. Suryadarma, S. Sumarto, The effects of location and sectoral components of economic growth on poverty: Evidence from Indonesia, J. Dev. Econ. 89 (2009) 109-117. [33] S.K. Jha, The Kuznets Curve: A reassessment, World Dev. 24 (1996) 773-780. [34] J. Thornton, The Kuznets inverted-U hypothesis: panel data evidence from 96 countries, Appl. Econ. Lett. 8 (2001) 15-16. [35] D. Chambers, Does a rising tide raise all ships? The impact of growth on inequality, Appl. Econ. Lett. 17 (2010) 581-586. [36] J.E. Riggs, J.C. Hobbs, G.R. Hobbs, T.H. Riggs, Kuznets curves stratified by mean per capita income, 1969-2007: Implications regarding global economic development and income inequality, Mod. Econ. 3 (2012) 617-625. [37] C. Elbers, P. Lanjouw, Intersectoral transfer, growth, and inequality in rural Ecuador, World Dev. 29 (2001) 481-496. [38] M. Shahbaz, Income inequality-economic growth and non-linearity: a case of Pakistan, Int. J. Soc. Econ. 37 (2010) 613-636. [39] S.K. Das, A. Barua, Regional inequalities, economic growth and liberalization: A study of the Indian economy, J. Dev. Stud. 32 (1996) 364-390. [40] K. Deininger, L. Squire, New ways of looking at old issues: inequality and growth, J. Dev. Econ. 57 (1998) 259-287. [41] M. Ravallion, Inequality is bad for the poor, Policy Research Working Paper 3677 (2005). [42] S. Gupta, H. Davoodi, R. Alonso-Terme, Does corruption affect income inequality and poverty?, Econ. Gov. 3 (2002) 23-45. [43] K. Gyimah-Brempong, Corruption, economic growth and income inequality in Africa, Econ. Gov. 3 (2002), 183-209. [44] K. Gyimah-Brempong, S.M. de Camacho, Corruption, growth, and income distribution: Are there regional differences?, Econ. Gov. 7 (2006) 245-269. [45] H. Li, L.C. Xu, H. Zou, Corruption, income distribution and growth, Economics and Politics, 12 (2000) 155-182. [46] Political Risk Services Group, ICRG Methodology (n.d.), Retrieved September 17, 2011, from: http://www.prsgroup.com/ICRG_Methodology.aspx [47] R.H. Adams, J. Page, Poverty, inequality and growth in selected Middle East and North Africa countries, 1980-2000, World Dev. 31 (2003) 2027-2048. [48] A.M. Balisacan, Growth, redistribution and poverty: Is Philippines an exception to the standard Asian story?, J. Asia-Pac. Econ. 5 (2000) 125-140. [49] M. Ravallion, S. Chen, Measuring pro-poor growth, Econ. Lett. 78 (2001) 93-99. [50] K.J. Forbes, A Reassessment of the relationship between inequality and growth, Am. Econ. Rev. 90 (2000) 869-897. [51] C. Hsiao, Analysis of panel data, second ed., Cambridge University Press, Cambridge, 2003. [52] G.H.Y. Lee, M. Azali, The endogeneity of the optimum currency area criteria in East Asia, Econ. Model. 27 (2010) 165-170. [53] M. Arellano, S. Bond, Some tests for specification for panel data: Monte Carlo evidence and an application to employment equations, Rev. Econ. Stud. 58 (1991) 277-297. [54] R. Blundell, S. Bond, Initial conditions and moment restrictions in dynamic panel data models, J. Econom. 87 (1998) 115-143. [55] A. Levin, C. Lin, C.J. Chu, Unit root tests in panel data: asymptotic and finite-sample properties, J. Econom. 108 (2002) 1-24. [56] M. Arellano, O. Bover, Another look at the instrumental variable estimation of error-component models, J. Econom. 68 (1995) 29-51. [57] D.N. Gujarati, Basic Econometrics, fourth ed., McGraw-Hill/Irwin, New York, 2003. [58] ADB, Poverty in Pakistan: Issues, causes, and institutional responses (2002). [59] T.P. Soubbotina, K.A. Sheram, Beyond economic growth: Meeting the challenges of global development (2000), The World Bank, Washington D.C. [60] World Bank, A framework for strengthening access to justice in Indonesia (2007). [61] A. Wederman, Development and corruption: the East Asian paradox, in: E.T. Gómez (Eds.), Political business in East Asia, Routledge, London, 2002, pp. 34-61. [62] K. F. Becker, The informal economy (2004), Retrieved from Swedish International Development Cooperation Agency: http://rru.worldbank.org/Documents/PapersLinks/Sida.pdf [63] S. Dobson & C. Ramlogan-Dobson, Why is corruption less harmful to income inequality in Latin America?, World Dev. 40 (2012) 1534-1545. [64] F. Bourguignon, T. Verdier, Oligarchy, democracy, inequality and growth, J. Dev. Econ. 62 (2000) 285-313. [65] D. Dollar, A. Kraay, Institutions, trade, and growth, J. Monet. Econ. 50 (2003) 133-162. [66] M. Bussolo, A. Nicita, Trade policy reforms (2009), Retrieved from the World Bank: http://siteresources.worldbank.org/INTPSIA/Resources/490023-1120845825946/Trade.pdf [67] M. Bruno, M. Ravallion, L. Squire, Equity and growth in developing countries, Policy Research Working Paper 1563 (1996). [68] R. Walker, S. Pellissery, Giants old and new: Promoting social security and economic growth in the Asia and Pacific region, Int. Soc. Secur. Rev. 61 (2008) 81-103. |
URI: | https://mpra.ub.uni-muenchen.de/id/eprint/52763 |