(DP 2001-11) Probing Beneath Cross-National Averages: Poverty, Inequality, and Growth in the Philippines

Abstract

Recent research papers employing cross-national regressions report that the incomes of the poor move one-for-one with overall average incomes, suggesting that poverty reduction requires nothing much more than promoting rapid economic growth. This paper attempts to probe beneath cross-country averages by analyzing provincial data on the poverty-growth nexus in the Philippines. The results show that economic growth explains a lot but not all about poverty. The balance which seems fairly large can be accounted for by other factors (e.g. infrastructure, human capital, and location-specific characteristics) and institutions (e.g., political economy and agrarian reform). Thus, while growth is indeed good for the poor, it is not good enough. How much is not good enough is illustrated by this paper and will become clearer still as subnational analysis is etended to more countries. For policy purposes, an intra-country examination of the determinants of poverty reduction seems clearly superior to cross-country analysis.

JEL Classification: 132, 015, R11

Key words: Welfare, poverty, inequality, economic growth, Philippines