The role of growth and income distribution in poverty reduction: the case of the South-Eastern Asian countries

Abstract

This thesis research contributes to exploring the impact of economic growth and inequality on poverty. In detail, this research aims to identify the effect of income growth on poverty and the impact of inequality on the rate at which growth reduces poverty. This research use unbalanced-panel data for South-Eastern Asian countries in the period from 1981 to 2010. The research argues that for all three measures of poverty, i.e. headcount ratio (P0¬), poverty gap (P0) and poverty squared gap (P2) income growth has a significant and negative impact on poverty. The estimated growth elasticity of poverty for the whole region is -3.25 for P0, -4.00 for P1 and -4.47 for P¬2. Additionally, inequality as well as the level of initial inequality is found to affect the impact of income growth on poverty reduction significantly. Higher inequality as well as higher initial level of inequality decelerates the growth elasticity of poverty in absolute value. Finally, the impacts of income growth and inequality are larger on the more sensitive measures of poverty.