The pace of poverty reduction across the globe: An exploratory analysis

Purpose: This is an account-taking paper on the status of global poverty and its reduction. The purpose of this paper is to examine why some countries reduce poverty more quickly than others. Design/methodology/approach: The data on the population living below $1 a day during 2000 and 2002 reported in the World Development Indicators (WDI) 2004 have been used to identify the status and determinants of poverty across countries. Next, using the national data on poverty level with respect to countries having a $1 poverty level of more than 3 percent as reported in WDI-2004, the rate of change in the poverty level was calculated. In both cases, the explained and the explanatory variables used in the multiple regression frameworks were selected based on theory and other empirical findings. Findings: The results indicate that countries with sustainable agricultural growth, foreign capital flows, and better infrastructure tend to achieve a faster reduction in poverty. Research limitations/implications: In a cross-country empirical analysis, it is difficult to obtain consistent and uniform infrastructure indices. The proxies used in this paper could be improved. Practical implications: The practical implications of policy formulations are to strengthen economic activities such as labour-intensive export promotion, emphasis on agriculture productivity, improved communication and infrastructure, besides effectively implementing policy initiatives such as population control, reduced dependency on aids and reducing malnutrition to achieve a lower incidence of health expenditure. Originality/value: This paper identifies the common economic characteristics that prevail across the countries with extreme poverty by developing a statistically consistent model from a pool of explanatory variables selected from earlier cross-country poverty studies.