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Poverty and Economic Freedom: Evidence from Cross-Country Data

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Author Info

  • Rana Hasan

    ()
    (Asian Development Bank, Manila, Philippines)

  • M.G. Quibria

    (Operations Evaluation Department, Asian Development Bank, Manila, Philippines)

  • Yangseon Kim

    (Visiting Scholar, East-West Center)

Abstract

This paper explores the empirical relationship between poverty and economic freedom. In doing so, it estimates the levels of absolute poverty for a panel of over forty developing countries and then utilizes fixed effects and GMM-IV estimators to derive the empirical relationships. The principal empirical results that emerge from this exercise indicate that important indicators of economic freedom such as openness to trade and small size of the government are robustly associated with poverty reduction. Labor market flexibility, which reflects an important dimension of economic freedom, does not have a significant effect on poverty on average. However, there is some evidence that trade's beneficial impact on poverty has been smaller in economies with more regulated labor markets. Finally, civil liberties that encompass various types of important economic freedom such as poverty rights, rule of law, etc., also contribute significantly to poverty reduction. This result contrasts with that for political liberties, which have seemingly no impact on poverty reduction. All these suggest that economic freedom is as much important for economic growth as for poverty reduction.

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Bibliographic Info

Paper provided by East-West Center, Economics Study Area in its series Economics Study Area Working Papers with number 60.

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Length: 40 pages
Date of creation: Sep 2003
Date of revision:
Handle: RePEc:ewc:wpaper:wp60

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Cited by:
  1. M. G. Quibria, 2006. "Measuring Global Poverty Right Mission Impossible?," Macroeconomics Working Papers 22475, East Asian Bureau of Economic Research.
  2. J.Salcedo Cain & Rana Hasan & Devashish Mitra, 2010. "Trade Liberalization and Poverty Reduction: New Evidence from Indian States," Working Papers 3333, School of International and Public Affairs, Columbia University, revised Nov 2010.
  3. Sen Gupta, Abhijit & Hasan, Rana & Lamba, Sneha, 2014. "Growth, Structural Change, and Poverty Reduction: Evidence from India," MPRA Paper 55247, University Library of Munich, Germany.

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