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Sustainable Utilization of Financial and Institutional Resources in Reducing Income Inequality and Poverty

Atta Ullah (), Zhao Kui (), Saif Ullah (), Chen Pinglu () and Saba Khan ()
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Atta Ullah: Institute of Poverty Reduction and Development, School of Management, Huazhong University of Science and Technology, Wuhan 430074, China
Zhao Kui: School of Management, Huazhong University of Science and Technology, Wuhan 430074, China
Chen Pinglu: Institute of Poverty Reduction and Development, School of Management, Huazhong University of Science and Technology, Wuhan 430074, China
Saba Khan: Management Sciences, National University of Modern Languages, Multan Campus 66000, Punjab, Pakistan

Sustainability, 2021, vol. 13, issue 3, 1-25

Abstract: This study aims to determine the role of globalization, electronic government, financial development, concerning the moderation of institutional quality in reducing income inequality and poverty in One Belt One Road countries. The electronic government and regional integration of the economies of the One Belt One Road countries has increased globalization and can play a vital role in reducing income inequality and poverty. However, this globalization and digital transformation of government systems can only be beneficial in the presence of good institutional quality. The sample includes 64 One Belt One Road countries from 2003 to 2018. We employed a two-step system generalized method of moment (Sys-GMM) and a robustness check through Driscoll–Kraay standard errors regression. Our findings show that globalization, economic growth, e-government development, government expenditure, and inflation have a statistically significant and negative impact on income inequality and are key to eradicating income inequality and poverty. On the other hand, financial development, gross capital formation, and population size positively influence income inequality, which causes an increase in poverty and income inequality as financial development and population levels increase. Moderating variable institutional quality also positively impacts income inequality, which means that institutional quality in Belt and Road Countries is weak, as they are mostly developing countries that need to improve their systems. Moreover, the marginal effect also revealed that institutional quality has a corrective effect on the factors’ relationship with income inequality. Our findings endorse and conclude that globalization and e-government development improve economic growth and eradicate poverty and income inequality by boosting digitalization, investments, job creation, and wage increases for semi-skilled and unskilled human capital in Belt and Road countries. The sustainable utilization of financial and institutional resources plays a vital role in reducing income inequality and poverty in Belt and Road countries.

Keywords: financial development; globalization; electronic government; economic growth; income inequality; poverty; institutional quality; panel cointegration; two-step Sys-GMM; Driscoll­–Kraay Standard errors regression (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2021
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