ESTIMATING THE RELATIONSHIP BETWEEN GOVERNANCE, ECONOMIC GROWTH, INEQUALITY AND POVERTY
Abstract
The main purpose of this paper is to estimate the relationship between governance, economic growth, inequality and poverty for 81 countries for the period 2000-2016. We divided the countries into three groups, low-income countries, lower-middle-income countries and upper-middle-income countries. To answer our research question, we use a structural model with simultaneous equations on Panel data. Our results show that the positive or negative impact of governance on the growth-inequality-poverty triangle changes depending on the dimension of governance taken into account and the sample being studied. Given the negative relationship between inequality and growth, democracy should a second time positively affect economic growth through the reduction of inequalities.
References
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[27] Easterly, W. and Levine, R. 2002. It's not factor accumulation: stylized facts and growth models. Central Bank of Chile, 6: 061-114.
[28] Egla et al. 2020. Poverty—A Challenge for Economic Development? Evidences from Western Balkan Countries and the European Union. Sustainability, 12, 7754. DOI: 10.3390/su12187754
[29] Forbes, K.-J. 2000. A Reassessment of the Relationship between Inequality and Growth. American Economic Review, 90 (4): 869-887. DOI: 10.1257/aer.90.4.869
[30] Fosu, A. 2009. Inequality and the Impact of Growth on Poverty: Comparative Evidence for Sub-Saharan Africa. Journal of Development Studies, 45(5): 726–745. DOI: 10.1080/00220380802663633
[31] Glaeser, E. L., La Porta, R., Lopez-de-Silanes, F. and Shleifer, A. 2004. Do institutions cause growth? Journal of economic Growth, 9(3): 271-303. DOI: https://doi.org/10.1023/B:JOEG.0000038933.16398.ed
[32] Grossman, G. M. and Helpman, E. 1991. Trade, knowledge spillovers, and growth. European economic review, 35(2-3): 517-526. DOI: https://doi.org/10.1016/0014-2921(91)90153-A
[33] Gyimah-Brempong, K. and Traynor, T. 1999. Political Instability, Investment, and Economic Growth in Sub-Saharan Africa. Journal of African Economies, 8 (1): 52–86. DOI: https://doi.org/10.1093/jae/8.1.52
[34] Kaufmann, D. and Kraay, A. 2002. Growth without Governance. World Bank Policy Research Working Paper No. 2928, the World Bank.
[35] Kaufmann, D., Kraay, A. and Zoido-Lobaton, P. 1999. Aggregating governance indicators. World Bank Policy Research,Working Paper, 2196. Washington DC: World Bank Institute.
[36] Le Caous, E. and Huarng, F. 2020. Economic Complexity and the Mediating Effects of Income Inequality: Reaching Sustainable Development in Developing Countries. Sustainability, 12, 2089. DOI:https://doi.org/10.3390/su12052089
[37] Li, H., Xu, C. and Zou, H.-F. 2000. Corruption, Income Distribution, and Growth. Economics and Politics 12(2): 155-182. DOI: https://doi.org/10.1111/ecpo.2000.12.issue-2
[38] Lucas Jr, R. E. 1988. On the mechanics of economic development. Journal of monetary economics, 22(1): 3-42. DOI: https://doi.org/10.1016/0304-3932(88)90168-7
[39] Mauro, P. 1995. Corruption and growth. Quaterly Journal of Economics, 110 (3): 681-712. DOI:https://doi.org/10.2307/2946696
[40] Mauro, P. 1996. The Effects of Corruption on Growth, Investment, and Government Expenditure, Washington D. C., International Monetary Fund, working paper WP/96/98.
[41] Meng. X., Gregory, R. and Wang, Y. 2005. Poverty, Inequality, and growth in urban China. Journal of Comparative Economics, 33(4): 710 -729
[42] Ngepah, N. 2011b. Exploring the Impact of Energy Sources on Production, Inequality and Poverty in Simultaneous Equations Models for South Africa. African Development Review, 23(3): 335– 351. DOI:https://doi.org/10.1111/j.1467-8268.2011.00290.x
[43] Nguyen et al. 2020. The relationship between government quality, economic growth and income inequality within Vietnam. Cogent Business & Management, 7(1): 1736847. DOI:https://doi.org/10.1080/23311975.2020.1736847
[44] OECD (2007/2008). Education at a Glance: OECD Indicators, OECD Publishing. Ravallion, M. & S. Chen (2003). ‘Measuring Pro-Poor Growth’. Economics Letters, 78(1): 93-99.
[45] Ravallion, M. 2001. Growth, Inequality, and Poverty: Looking Beyond Averages. World Development, 66 29(11): 1803–1815.
[46] Rodrik, D. 1999. Where did all the growth go? External Shocs, Social Conflict, and Growth Collapses. Journal of Economic Growth, 4(4): 385-412.
[47] Romer, P.M. 1986. Increasing Returns and Long-Run Growth. Journal of Political Economy, 94: 1002-1037.
[48] Sala-i-Martin, X. and Pinkovskiy, M. 2010. African Poverty is Falling Much Faster Than You Think! National Bureau of Economic Research Working Paper No. 15775. Cambridge, MA: National Bureau of Economic Research.
[49] Vo, D.H., Nguyen, T.C., Tran, N.P. and Vo, A. 2019. What Factors Affect Income Inequality and Economic Growth in Middle-Income Countries? J. Risk Financ. Manag. 12, 40. DOI:https://doi.org/10.3390/jrfm12010040
[50] Yogeeswari, et al. 2021. The impact of microfinance on poverty and income inequality in developing countries. Asian Pacific Economic Literature, 35(1): 36-48. DOI: https://doi.org/10.1111/apel.12326
[51] Young, A. 2012. The African Growth Miracle. Journal of Political Economy, 120(4): 696–739. DOI:https://doi.org/10.1086/668501
[2] Achim, M.V. 2017. Corruption, income and business development. J. Int. Bus. Entrep. Dev. 10: 85–100. DOI: https://doi.org/10.1504/JIBED.2017.082757
[3] Adams, R. 2004. Economic Growth, Inequality and Poverty: Estimating the Growth Elasticity of Poverty. World Development, 32(12): 1989–2014. DOI: http://dx.doi.org/10.1016/j.worlddev.2004.08.006
[4] Aghion, P. and Bolton, P. 1997. A Theory of Trickle-Down Growth and Development. Review of Economic Studies, 64(2): 151–172. DOI: https://doi.org/10.2307/2971707
[5] Aghion, P., Howitt, P., Brant-Collett, M. and García-Peñalosa, C. 1998. Endogenous growth theory. MIT press.
[6] Aidt, T.J., Dutta, V. and Sena, E. 2005. Governance and Corruption in the Presence of Threshold Effects: Theory and Evidence. University of Cambridge, Faculty of Economics.
[7] Akobeng, E. 2016. Growth and Institutions: A Potential Medicine for the Poor in Sub‐Saharan Africa. African Development Review, 28(1): 1-17. DOI: https://doi.org/10.1111/1467-8268.12163
[8] Alesina, A. and Perotti, R. 1996. Income Distribution, Political Instability, and Investment. European Economic Review, 40(6): 1203-1228. DOI: http://dx.doi.org/10.1016/0014-2921(95)00030-5
[9] Alesina, A. and Rodrik, D. 1994. Distributive Politics and Economic Growth. Quarterly Journal of Economics, 109(2): 465-490. DOI: http://dx.doi.org/10.2307/2118470
[10] Ali, A. and Thorbecke, E. 2000. The state and path of poverty in Sub-Saharan Africa: Some Preliminary Results. Journal of African Economies, 9(1): 9–40. DOI: http://dx.doi.org/10.1093/jafeco/9.Supplement_1.9
[11] Anyanwu, J. C. 2013. Determining the Correlates of Poverty for Inclusive Growth in Africa. African Development Bank, Tunis.
[12] Bardhan, P., Bowles, S. and Ginitis, H. 2000. Wealth Inequality, Wealth Constraints and Economic Performance. In: A.B. Atkinson and F. Bourguignon (eds.), Handbook of Income Distribution Volume 1. Amsterdam, Netherlands: North-Holland.
[13] Barro, R. 2000. Inequality and Growth in a Panel of Countries. Journal of Economic Growth, 5(1): 5–32. DOI: https://doi.org/10.1023/A:1009850119329
[14] Barro, R. J. 2001. Human Capital and Growth. American Economic Review, 91(2): 12-17. DOI:https://doi.org/10.1257/aer.91.2.12
[15] Barro, R.J. 1989. Economic Growth in a Cross Section of Countries. NBER Working Papers 3120, National Bureau of Economic Research, Inc.
[16] Barro, R.J. 1996. Democracy and growth. J Econ Growth, 1: 1–27. DOI:https://doi.org/10.1007/BF00163340
[17] Barro, R.J. and Sala-i-Martin, X. 1997. Technological Diffusion, Convergence, and Growth. Journal of Economic Growth, 2(1): 1-26.
[18] Bourguignon, F. 2004. The Poverty-Growth-Inequality Triangle. Indian Council for Research on International Economic Relations Working Paper No. 125. New Delhi, India: Indian Council for Research on International Economic Relations.
[19] Brueckner, M. and Lederman D. 2015. Effects of Income Inequality on Aggregate Production. World Bank Policy Discussion Paper 7317.
[20] Caner, M. and Hansen, B. E. 2004. Instrumental variable estimation of a threshold model. Econometric Theory, 20: 813–843. DOI: 10.1017/S0266466604205011
[21] Clague, C., Keefer, P., Knack, S. and Olson, M. 1996. Property and contract rights in autocracies and democracies. Journal of Economic Growth, 1(2): 243-276. DOI: https://doi.org/10.1007/BF00138864
[22] Collier, P. 2007. Done About It the Bottom Billion: Why the Poorest Countries are Failing and What Can be New York. Oxford University Press.
[23] Deininger, K. and Squire, L. 1996. A New Data Set Measuring Income Inequality. World Bank Economic Review, 10(3): 565-91. DOI: https://doi.org/10.1093/wber/10.3.565
[24] Deininger, K. and Squire, L. 1998. New ways of looking at old issues: inequality and growth. Journal of Development Economics, 57(2): 259-287. DOI: https://doi.org/10.1016/S0304-3878(98)00099-6
[25] Dollar, D. and Kraay, A. 2000. Growth is good for the poor, Development Research Group, The World Bank.
[26] Dollar, D. and Kraay, A. 2002. Growth Is Good for the Poor. Journal of Economic Growth, 7(3): 195– 225. DOI: https://doi.org/10.1023/A:1020139631000
[27] Easterly, W. and Levine, R. 2002. It's not factor accumulation: stylized facts and growth models. Central Bank of Chile, 6: 061-114.
[28] Egla et al. 2020. Poverty—A Challenge for Economic Development? Evidences from Western Balkan Countries and the European Union. Sustainability, 12, 7754. DOI: 10.3390/su12187754
[29] Forbes, K.-J. 2000. A Reassessment of the Relationship between Inequality and Growth. American Economic Review, 90 (4): 869-887. DOI: 10.1257/aer.90.4.869
[30] Fosu, A. 2009. Inequality and the Impact of Growth on Poverty: Comparative Evidence for Sub-Saharan Africa. Journal of Development Studies, 45(5): 726–745. DOI: 10.1080/00220380802663633
[31] Glaeser, E. L., La Porta, R., Lopez-de-Silanes, F. and Shleifer, A. 2004. Do institutions cause growth? Journal of economic Growth, 9(3): 271-303. DOI: https://doi.org/10.1023/B:JOEG.0000038933.16398.ed
[32] Grossman, G. M. and Helpman, E. 1991. Trade, knowledge spillovers, and growth. European economic review, 35(2-3): 517-526. DOI: https://doi.org/10.1016/0014-2921(91)90153-A
[33] Gyimah-Brempong, K. and Traynor, T. 1999. Political Instability, Investment, and Economic Growth in Sub-Saharan Africa. Journal of African Economies, 8 (1): 52–86. DOI: https://doi.org/10.1093/jae/8.1.52
[34] Kaufmann, D. and Kraay, A. 2002. Growth without Governance. World Bank Policy Research Working Paper No. 2928, the World Bank.
[35] Kaufmann, D., Kraay, A. and Zoido-Lobaton, P. 1999. Aggregating governance indicators. World Bank Policy Research,Working Paper, 2196. Washington DC: World Bank Institute.
[36] Le Caous, E. and Huarng, F. 2020. Economic Complexity and the Mediating Effects of Income Inequality: Reaching Sustainable Development in Developing Countries. Sustainability, 12, 2089. DOI:https://doi.org/10.3390/su12052089
[37] Li, H., Xu, C. and Zou, H.-F. 2000. Corruption, Income Distribution, and Growth. Economics and Politics 12(2): 155-182. DOI: https://doi.org/10.1111/ecpo.2000.12.issue-2
[38] Lucas Jr, R. E. 1988. On the mechanics of economic development. Journal of monetary economics, 22(1): 3-42. DOI: https://doi.org/10.1016/0304-3932(88)90168-7
[39] Mauro, P. 1995. Corruption and growth. Quaterly Journal of Economics, 110 (3): 681-712. DOI:https://doi.org/10.2307/2946696
[40] Mauro, P. 1996. The Effects of Corruption on Growth, Investment, and Government Expenditure, Washington D. C., International Monetary Fund, working paper WP/96/98.
[41] Meng. X., Gregory, R. and Wang, Y. 2005. Poverty, Inequality, and growth in urban China. Journal of Comparative Economics, 33(4): 710 -729
[42] Ngepah, N. 2011b. Exploring the Impact of Energy Sources on Production, Inequality and Poverty in Simultaneous Equations Models for South Africa. African Development Review, 23(3): 335– 351. DOI:https://doi.org/10.1111/j.1467-8268.2011.00290.x
[43] Nguyen et al. 2020. The relationship between government quality, economic growth and income inequality within Vietnam. Cogent Business & Management, 7(1): 1736847. DOI:https://doi.org/10.1080/23311975.2020.1736847
[44] OECD (2007/2008). Education at a Glance: OECD Indicators, OECD Publishing. Ravallion, M. & S. Chen (2003). ‘Measuring Pro-Poor Growth’. Economics Letters, 78(1): 93-99.
[45] Ravallion, M. 2001. Growth, Inequality, and Poverty: Looking Beyond Averages. World Development, 66 29(11): 1803–1815.
[46] Rodrik, D. 1999. Where did all the growth go? External Shocs, Social Conflict, and Growth Collapses. Journal of Economic Growth, 4(4): 385-412.
[47] Romer, P.M. 1986. Increasing Returns and Long-Run Growth. Journal of Political Economy, 94: 1002-1037.
[48] Sala-i-Martin, X. and Pinkovskiy, M. 2010. African Poverty is Falling Much Faster Than You Think! National Bureau of Economic Research Working Paper No. 15775. Cambridge, MA: National Bureau of Economic Research.
[49] Vo, D.H., Nguyen, T.C., Tran, N.P. and Vo, A. 2019. What Factors Affect Income Inequality and Economic Growth in Middle-Income Countries? J. Risk Financ. Manag. 12, 40. DOI:https://doi.org/10.3390/jrfm12010040
[50] Yogeeswari, et al. 2021. The impact of microfinance on poverty and income inequality in developing countries. Asian Pacific Economic Literature, 35(1): 36-48. DOI: https://doi.org/10.1111/apel.12326
[51] Young, A. 2012. The African Growth Miracle. Journal of Political Economy, 120(4): 696–739. DOI:https://doi.org/10.1086/668501
Published
2021-06-30
How to Cite
TOUITOU, Mohammed.
ESTIMATING THE RELATIONSHIP BETWEEN GOVERNANCE, ECONOMIC GROWTH, INEQUALITY AND POVERTY.
Theoretical and Practical Research in Economic Fields, [S.l.], v. 12, n. 1, p. 21-30, june 2021.
ISSN 2068-7710.
Available at: <https://journals.aserspublishing.eu/tpref/article/view/6218>. Date accessed: 22 dec. 2024.
doi: https://doi.org/10.14505/tpref.v12.1(23).03.
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