Impact Of Economic Growth On Poverty

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Economic growth is the single most important factor influencing poverty, though it is the engine of poverty reduction, it works more effectively in some situations than in others” (Brian, Ward, Shanta, Alejandro, 2001). According to Fan , Hazel, Thorat, (1999), Fan, Zhang, and Rao, (2004) and Chemingui (2005), targeting government expenditures imply to lower poverty was not enough. Government expenditure is also needed to stimulate economic growth to help generate the resources required for future government expenditures, such growth was the only means of providing a lasting solution to the problem and to increase the overall welfare of the people. Brian et al (2001) has pointed out two key factors that appear to determine the impact…show more content…
According to Brian et al (2001), while faster growth in agriculture may tackle rural poverty in the short term, dependence on agricultural activity may also strengthen output variability, which, in turn, would contribute to increasing rather than lowering poverty. However a more diversified economy with a viable manufacturing sector might present the best likelihood for a sustainable progress in living standards in the long run. The studies of Gomanee, Morrissey, Mosley and Verschoo (2003), and Mosley, Hudson and Verschoor (2004) Using cross-country data in separate study estimated the effects of expenditure of the government in different sectors on the US$1-a-day poverty headcount. The two studies held the level of GDP per capita constant. The result of the studies revealed that higher government spending on education, agriculture; housing and amenities all have a negative and significant impact on poverty, most likely by shifting the distribution of income in a pro-poor direction, in view of the fact that the level of aggregate income is held constant in their studies. More so, some other studies like Fan et al. (1999), for instance, have used cross state data, particularly in India that seen to have high quality data, to estimate the effect of public expenditure on levels of rural poverty across the…show more content…
The results showed that government expenditure on Agricultural research and extension significantly improved agricultural production substantially. He concluded that Agricultural research and extension spending has the largest significant impact on poverty reduction. The effect of expenditure on Education on poverty reduction was ranked after Agriculture and road. However, government expenditure in health did not confirm a large impact on growth in agricultural output and a reduction in rural poverty, but in part because of difficulties in measuring some of the impacts of this type of investment. He stated that the poverty reduction effect of spending on infrastructure and education is particularly high in some

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