Poverty Reduction and the Role of Institutions in Developing Asia

The extent and seriousness of poverty vary markedly across Asian developing countries, and so does the rate at which poverty has changed over time. In addition, there are large intercountry differences in the extent to which social services, especially health and education, reach the poor. There is no simple explanation for these disparities. However, they do demonstrate that poverty is the outcome not only of economic phenomena but also of social and political processes and how these interact with each other. Mediating these interactions is a variety of institutions that are important to understanding poverty and devising needed policies. Institutions affect poverty both directly and indirectly via a number of mediating factors. Institutions influence government policies, which in turn influence growth and distributional outcomes, which then affect the pace of poverty reduction. In addition, institutions directly influence the pace and quality of economic growth. Then, of course, government policies affect institutions as well. The impact of institutions—whether political, social, cultural or administrative—on poverty reduction is thus pervasive. This paper examines the effects of institutions on poverty reduction and the pathways through which these effects operate.