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Working Paper Series - Impact of Public Policies on Poverty, Income Distribution and Growth



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Impact of Public Policies on Poverty, Income Distribution and Growth


Volume : 0

No : 0

ISSN : WPS0401

Publisher : Arab Planning Institute - Kuwait

Author (s) : Belkacem Laabas , Imed Limam

Published Date : 1/1/2004


Contents :
Paramount to the recent UN Millennium Development Goals initiative is the issue of whether public policies are at all efficient in alleviating poverty. From this premise, the paper proposes to analyze the impact on poverty of several components of public policies by avoiding the flaws in the scattered literature on the subject. It departs from available literature by directly focusing on the link between public social policies and poverty rather than indirectly through the impact of these policies on specific social outcomes. It also uses a framework that accounts for the endogeneity of and interactions between growth, income inequality, and poverty using different definitions of poverty and alternative estimation methods applied to a larger sample size and more recent data compiled from various sources. The results show that: (i) public policies affect poverty only indirectly through their impact on income distribution and mean expenditure; (ii) unlike what is generally believed, policies aimed at improving income distribution are more effective in affecting poverty than policies targeted to improving mean consumption and growth; (iii) overall Government expenditures, transfers and monetary policy aimed at reducing inflation, have all a positive impact on the extent of poverty. Openness, on the other hand, although a pro-growth policy, was found to have negative impact on income distribution and poverty. Given the conflicting impact of public policies on growth, poverty and income distribution, care has to be taken to choose the right mix of policies achieving positive results on these three variables; (iv) among the social spending chapters in Government budget, transfers seem to be more effective in affecting income distribution and poverty; (v) policies aimed at sustaining basic necessity production such as that of cereals, have a larger impact on poverty and income distribution than aggregate public policies; (vi) public policies and other variables affecting poverty are found to have a more significant impact on the degree of severity of poverty than on the number of the poor. 

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