Bringing Up Incentives: A Look at the Determinants of Poverty. Alice Sheehan

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1 Bringing Up Incentives: A Look at the Determinants of Poverty Alice Sheehan

2 Outline presentation What s going on out there? Growth, Human Development indicators, Poverty rates, etc. A look at determinants of poverty on three different levels: Immediate, Community, and Regional/National An example of these determinants in action A look at the Root Determinants of poverty Data Analysis

3 Annual increase in per capita GDP Source: Cooper, 2005

4 Some human development indicators Source: Cooper, 2005

5 Poverty in the World, Source: Cooper, 2005

6 People living on less than $1 a day (in millions) Source: World Bank Atlas, 2006

7 Research Question Why do we see such large variations of poverty rates across countries?

8 Immediate determinants of poverty at the individual & household levels Demographic Economic Social Household composition Dependency ratio Age and sex of household head Household employment Land owned Ownership of other assets Health Education Shelter

9 Community and regional/national level determinants Community Level Access to infrastructure Human resources development Access to employment Social mobility Political representation Land distribution Social Capital Regional/National Level Institutions Quality of governance Control of Corruption An active civil society Geography Environmental Conditions Gender, ethnic, racial inequality

10 Reasons for leaving primary school in Zambia Source: World Bank Atlas, 2006

11 Root Determinants of Poverty Institutions Quality of Governance Macroeconomic policies Investment climate Risk of Expropriation, Government Effectiveness, Regulatory Quality, Rule of Law, and more Geography Mean Temperature, Proportion of land within 100 Km from the sea, Absolute Latitude Development strategies and Aid Efficiency Good Aid Management Harmonization and Alignment Pro-Poor Growth

12 Correlation between Poverty Rate and Rule of Law: MOZ MDG MLIBOL COL ZMB MWI TCD LAO KGZ GTM ARM AZE BGD CMR NICMRT PER UGA BFA KAZ ETH YEM NPL GHA BLR KHM PNG TZA PHL ZWE GUY PAK UZB KEN DOM IND ALB BGR IDN JAM BIH GEO DZA PAN LKA MAR EGY JOR HUN CHL CHN Rule of Law - average bandwidth =.8

13 Correlation between Log Poverty Rate and Government Effectiveness: TJKTKM NGA ZMB GMB BDI MDG NIC GHA BFA MWISLV HND MOZ KHM BGD IND PER ECU PRY VEN MRT UZB BOL ETH LAO CMR YEM GTM KAZ ARMVNM MEX CIVCHN PHL PAK PANBRA COL BLR AZE BGR RUS GEOLKA IDN ROM UKR CRI KENKGZ ALBDOM IRN JAM LVA HRV EGY GUY LTU TURMAR JOR SVK HUNTUN POL CZE SVN EST THA KOR ARG URY MYS CHL Government Effectiveness - average bandwidth =.8

14 Correlation between Log Poverty Gap and Control of Corruption: ZMB MOZ MDG MWI BOL COL MLI GTM KGZ ARM AZE BGD CMR NIC PER ETH KAZ UGA BFA NPL YEM LAO GHA TZAKHM BLR PANPHL PNG GUY ZWE PAK KEN UZB DOM IND BGR LKA ALB IDN JAM EGYMAR GEO DZA JOR CHN HUN CHL Control of Corruption bandwidth =.8

15 Correlation between Poverty Rate and Risk of Expropriation: MLI MDG BOL ZMB MOZ MWI COL GTM UGA BFA BGD NIC PHL PER CMR ETH YEM GHA PAN ZWE PAK KEN DOM LKA TZA EGY DZAJOR ALB JAM MAR PNG IDN CHL IND BGR HUN CHN Risk of Expropriation - average bandwidth =.8

16 Correlation between Poverty Rate and Regulatory Quality: BIH ETH UZB AZE MOZ LAOBLR KGZ GTM ARM BGD CMR MRT NIC PER BFA KAZ DJIUGA YEM NPL GHA PNG ZWE TZA KHM PHLPAN GUY GEO DZA MWI PAK KEN MDG IND DOM ALB BGR LKA EGY IDN MAR HUN JAM CHN TCDMLI JOR ZMB COL BOL CHL Regulatory Quality - average bandwidth =.8

17 Correlation between Poverty Rate and Time Required to Start a Business: ZMB MDG MWI MLICOL BOL TCD MOZ KGZ GTM ARM BGD KAZ ETH UGA CMR NIC MRT PER BFA NPL YEM GHA PAN TZA PHL PNG GUY KHM BLR ZWE PAK UZB KEN DOM IND BGRALB LKA MAR JAM CHL EGY BIH HUN GEO DZA JOR AZE IDN LAO CHN Time required to start a business (days) - average bandwidth =.8

18 Correlation between Log Poverty Gap and Proportion of Land within 100 km of the seacoast: ZMB BDI NGA BFA MWI GHA MOZ PERKHM MRT IND PRY BOL UZB ETH LAO VEN KAZ CHNCMR ARM CIV TJK TKM PAK BRA COL GMB BGD ECU YEMGTM MEX MDG NIC HND VNM SLV PHL PAN BGR RUS AZE GEO ROM UKR BLR CZE HUN KGZ SVK KEN IRNARG JORLTU POL EGYTHA URY MAR TUR TUN LVA HRV SVN CHL IDN EST MYS ALBKOR LKA CRI DOM JAM Proportion of land within 100 km of the seacoast bandwidth =.8

19 Correlation between Log Poverty Rate and Mean Temperature: HUN BGR CHL ALB ZMB BOL GTM MWI MDG MOZ COL TCD PER NPL UGA CMRMRT BGDNIC BFA LAOGHA ZWE TZA PHL PNG KHM PAN PAK KEN DOM IND LKA MAR EGY IDN JAM MLI JOR DZA CHN Mean Temperature bandwidth =.8

20 Correlation between Log Poverty Rate and lnmalfal: PER GTM NIC NPL MDG MOZ ZMB COL MLI TCDMWI BGD PAN PAK PHL YEM ETHBFA CMR UGA ZWE PNG LAO GHA KHM TZA IND KEN LKA IDN BOL CHN lnmalfal94 bandwidth =.8

21 Remarks Economic growth is good to reduce poverty Institutional quality is related to poverty rates Geographic variables are also correlated with poverty rates Pro-Poor growth strategies should include institutional development and take geographic variables into consideration Create incentives by reducing barriers

22 Acknowledgements Special Thanks to Professor Edinaldo Tebaldi

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