Date post: | 13-Feb-2017 |
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Breaking the Poverty TrapRonald U. Mendoza, Ph.D.Associate Professor of Economics
Social Protection
•An investment rather than mere redistribution…
•Strengthens citizenship and social cohesion…
•Only temporary: the issue of “graduation”…
•Fiscal sustainability…
•Mainly addresses the human capital investments for the next generation; but what about the present generation?•Risk of elite capture…
Source: Figure adapted from Balisacan (2011). Scenarios based on author’s calculations.
How growth trickles down?Ra
valli
on (2
001)
, 41
Deve
lopi
ng C
ount
ries
Wor
ld B
ank
(200
9), E
ast A
sia
1990
-200
6
Wor
ld B
ank
(200
9), T
haila
nd 1
990-
2006
Wor
ld B
ank
(200
9), I
ndon
esia
199
0-20
06
Wor
ld B
ank
(200
9), V
ietn
am 1
990-
2006
Wor
ld B
ank
(200
9), P
hilip
pine
s 19
90-2
006
Balis
acan
and
Fuw
a (2
004)
, Phi
lippi
nes
1988
-199
7
Balis
acan
(200
7), P
hilip
pine
s 19
88-2
003
-5
-4.5
-4
-3.5
-3
-2.5
-2
-1.5
-1
-0.5
0
Percent change in poverty incidence arising from 1% change in mean income
At 3% growth, and at 1.5% poverty elasticity of growth, it will take the Philippines 360 years to eliminate poverty.
At 8% growth, and at 1.5% poverty elasticity of growth, it will still take the Philippines 130 years to eliminate poverty.
At 10% growth (approximating China’s) and 5% poverty elasticity of growth (approximating Thailand’s), it will take 24 years to eliminate poverty in the Philippines.
Source: The Economist (2013).
Can we eradicate extreme poverty worldwide?
Inequality matters…
World Bank: a 1% increase in incomes cut poverty by 0.6% in the most unequal countries but by 4.3% in the most equal ones.
5
Schizoprenic economy?
Some elements of inclusiveness?
•Inclusive human capital investments (the starting point)…
•Building resilience in a crisis-prone world…
•Sustainable growth: shifting from (primarily) extractive and rent-based growth to innovation and productivity based growth…
•Competition and industrial policies: striking the balance (over time) between state and market; and between large and small enterprises – while preserving equity, efficiency and stability aspirations of society