Do Institutions Matter in Poverty Reduction? Prospects of Achieving the MDG of Poverty Reduction in Asia
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This paper assesses prospects of achieving the Millennium Development Goal (MDG) of income poverty in developing countries by 2015. A system of equations is estimated by 3SLS where institutional indicators are endogenous to historical and geographical factors and openness and inequality are also made endogenous. Our simulations confirm (i) the role of institutional quality improvement in raising income which in turn lowers poverty, and (ii) the needs for growth acceleration –especially in South Asia- and for reduction of inequality in achieving the MDG. A somewhat striking result is that even modest institutional improvements have significant poverty reducing effects through income growth.
Keywords: Poverty, growth, institutions, openness, inequality, Millennium Development Goals (MDG), Developing countries. Authors biographyRaghav Gaiha, Faculty of Management Studies, University of Delhi.Katsushi Imai, Corresponding author, Economics, School of Social Sciences, University of Manchester – mail address (e-mail: Katsushi.Imai@manchester.ac.uk). |