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Poverty and Economic Freedom: Evidence from Cross-Country Data

Author

Listed:
  • 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.

Suggested Citation

  • Rana Hasan & M.G. Quibria & Yangseon Kim, 2003. "Poverty and Economic Freedom: Evidence from Cross-Country Data," Economics Study Area Working Papers 60, East-West Center, Economics Study Area.
  • 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. 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.
    3. 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.
    4. Quibria, M.G., 2003. "Growth and Poverty Reduction Does Political Regime Matter?," MPRA Paper 10302, University Library of Munich, Germany, revised Jun 2003.
    5. Vatcharin Sirimaneetham, 2006. "What drives liberal policies in developing countries?," Bristol Economics Discussion Papers 06/587, Department of Economics, University of Bristol, UK.

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