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Breaking the Poverty trap
1. Breaking the Poverty Trap
Ronald U. Mendoza, Ph.D.
Associate Professor of Economics
2. Social Protection
•An investment rather than mere redistribution…
•Strengthens citizenship and social cohesion…
•Only temporary: the issue of “graduation”…
•Fiscal sustainability…
•Mainly addresses the human capital investments for the
next generation; but what about the present generation?
•Risk of elite capture…
3. Source: Figure adapted from Balisacan (2011). Scenarios based on
author’s calculations.
How growth trickles down?
-5
-4.5
-4
-3.5
-3
-2.5
-2
-1.5
-1
-0.5
0
Ravallion(2001),41
DevelopingCountries
WorldBank(2009),East
Asia1990-2006
WorldBank
(2009),Thailand1990-
2006
WorldBank
(2009),Indonesia1990-
2006
WorldBank
(2009),Vietnam1990-
2006
WorldBank
(2009),Philippines
1990-2006
BalisacanandFuwa
(2004),Philippines
1988-1997
Balisacan
(2007),Philippines
1988-2003
Percent change in poverty incidence arising from 1% change in mean income
At 3% growth, and at 1.5% poverty elasticity of
growth, it will take the Philippines 360 years to
eliminate poverty.
At 8% growth, and at 1.5% poverty elasticity of
growth, it will still take the Philippines 130 years to
eliminate poverty.
At 10% growth (approximating China’s) and 5%
poverty elasticity of growth (approximating
Thailand’s), it will take 24 years to eliminate
poverty in the Philippines.
4. Source: The Economist (2013).
Can we eradicate extreme
poverty worldwide?
Inequality matters…
World Bank: a 1%
increase in incomes cut
poverty by 0.6% in the
most unequal
countries but by 4.3%
in the most equal
ones.
6. Some elements of
inclusiveness?
•Inclusive human capital investments (the starting
point)…
•Building resilience in a crisis-prone world…
•Sustainable growth: shifting from (primarily) extractive
and rent-based growth to innovation and productivity
based growth…
•Competition and industrial policies: striking the balance
(over time) between state and market; and between large
and small enterprises – while preserving equity, efficiency
and stability aspirations of society
Notas do Editor
Young pupils in the Philippines risk their lives to get to school on time. ADB picture available here: http://www.adb.org/news/photo-essay/click-capturing-images-inclusive-growth
At 3% growth, and at 1.5% poverty elasticity of growth, it will take the Philippines 360 years to eliminate poverty.At 8% growth, and at 1.5% poverty elasticity of growth, it will still take the Philippines 130 years to eliminate poverty.At 10% growth (approximating China’s) and 5% poverty elasticity of growth (approximating Thailand’s), it will take 24 years to eliminate poverty in the Philippines.