Democracy and poverty reduction

Vigile Marie B. Fabella and Czarina Eva I. Oyales
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Vigile Marie B. Fabella: University of the Philippines School of Economics
Czarina Eva I. Oyales: University of the Philippines School of Economics

Philippine Review of Economics, 2008, vol. 45, issue 2, 235-269

Abstract: The past decade was witness to the rapid economic growth of countries whose political systems deviate from conventional democratic philosophy. Countries such as Taiwan, Singapore, and South Korea, among others, have become big economies rivaling major players like the United States and the United Kingdom. On the other hand, democratic, low-income countries have experienced relatively sluggish growth. In this paper, we explore the influence of democracy and political freedom on economic growth, utilizing poverty reduction as its indicator. We will focus on identifying the requisites of a functioning democracy within the context of developing nations that will enable it to effectively reduce poverty. Utilizing the 2-stage least squares method of estimation, our findings suggest that democracy, in general, has a negative influence on poverty reduction for developing countries. However, when complemented with trade openness, primary education, regulatory quality, effective governance, and voice and accountability, the outcome becomes positive.

Keywords: democracy; poverty; 2-stage least squares (search for similar items in EconPapers)
JEL-codes: I30 O43 (search for similar items in EconPapers)
Date: 2008
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