Macroeconomic policy for pro-poor growth [Elektronische Ressource] / vorgelegt von Rolf Maier
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Macroeconomic policy for pro-poor growth [Elektronische Ressource] / vorgelegt von Rolf Maier

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Macroeconomic Policy for Pro-Poor Growth Inaugural-Dissertation zur Erlangung des Grades Doctor oeconomiae publicae (Dr. oec. publ.) an der Ludwig-Maximilians-Universität München September 2004 vorgelegt von Rolf Maier Referent: Prof. Stephan Klasen, PhD Korreferent: Prof. Dr. Dalia Marin Promotionsabschlussberatung: 9. Februar 2005 Macroeconomic Policy for Pro-Poor Growth by Rolf Maier Submitted to the Department of Economics in partial fulfillment of the requirements for the degree of Doctor oeconomiae publicae (Dr. oec. publ.) at the Ludwig-Maximilians-University, Munich September 2004 Thesis Supervisor: Prof. Stephan Klasen, PhD Thesis Co-Supervisor: Prof. Dr. Dalia Marin Final Committee Consultation: 9. Februar 2005 Table of Contents General Introduction 1 Part I: External Debt and Pro-Poor Growth 6 1. Introduction 8 2. External debt and pro-poor growth 8 2.1 Literature review 8 2.2 Effects of external debt on pro-poor growth 13 3. Data sources and descriptive statistics 17 3.1 Data on income inequality measures 17 3.2 Debt indicators and additional macroeconomic variables 19 4. Pro-poor growth 22 5. Econometric specifications and estimations 23 5.1 Econometric specifications 23 5.1.1 System GMM estimation: level and first differenced equation 24 5.1.

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Publié le 01 janvier 2005
Nombre de lectures 20
Langue English
Poids de l'ouvrage 4 Mo

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Macroeconomic Policy for Pro-Poor Growth




Inaugural-Dissertation
zur Erlangung des Grades Doctor oeconomiae publicae (Dr. oec. publ.)
an der Ludwig-Maximilians-Universität München


September 2004


vorgelegt von

Rolf Maier






Referent: Prof. Stephan Klasen, PhD
Korreferent: Prof. Dr. Dalia Marin
Promotionsabschlussberatung: 9. Februar 2005


Macroeconomic Policy for Pro-Poor Growth

by

Rolf Maier



Submitted to the Department of Economics
in partial fulfillment of the requirements for the degree of
Doctor oeconomiae publicae (Dr. oec. publ.)
at the Ludwig-Maximilians-University, Munich


September 2004







Thesis Supervisor: Prof. Stephan Klasen, PhD
Thesis Co-Supervisor: Prof. Dr. Dalia Marin
Final Committee Consultation: 9. Februar 2005


Table of Contents

General Introduction 1

Part I: External Debt and Pro-Poor Growth 6

1. Introduction 8

2. External debt and pro-poor growth 8

2.1 Literature review 8
2.2 Effects of external debt on pro-poor growth 13

3. Data sources and descriptive statistics 17

3.1 Data on income inequality measures 17
3.2 Debt indicators and additional macroeconomic variables 19

4. Pro-poor growth 22

5. Econometric specifications and estimations 23

5.1 Econometric specifications 23
5.1.1 System GMM estimation: level and first differenced equation 24
5.1.2 Growth equation: pooled OLS, fixed effects or random effects estimation 26

5.2 Econometric issues 27

5.3 Estimation strategy and results 30
5.3.1 Debt indicators and pro-poor growth: distribution effect 30
5.3.2 Debt indicators and pro-poor growth: total effect 36

6. Conclusion 38

References 41

Tables 46


I Part II: Exchange Rate Regimes and Pro-Poor Growth 71

1. Introduction 73

2. Exchange rate regimes and pro-poor growth 74

2.1 Literature review 74
2.2 Effects of exchange rate regimes and pro-poor growth 77

3. Data sources and descriptive statistics 80

3.1 Data on income inequality measures 80
3.2 Classifications of exchange rate regimes and descriptive statistics 83
3.3 Data on additional macroeconomic variables 87

4. Pro-poor growth 88

5. Econometric specifications and estimations 90

5.1 Econometric specifications 90
5.1.1 System GMM estimation: level and first differenced equation 90
5.1.2 Growth equation: pooled OLS, fixed effects or random effects estimation 92

5.2 Econometric issues 94

5.3 Estimation strategy and results 96
5.3.1 Exchange rate regimes and pro-poor growth: distribution effect 97
5.3.2 Exchange rate regimes, pro-poor growth, currency crises and 101
capital controls: distribution effect
5.3.3 Exchange rate regimes, pro-poor growth, inflation and 102
output volatility: distribution effect
5.3.4 Exchange rate regimes, pro-poor growth, and additional 103
macroeconomic variables: distribution effect
5.3.5 Exchange rate regimes, pro-poor growth, and additional 105
macroeconomic variables: total effect

6. Conclusion 108

References 111

Tables 117
II Part III: Trade Policy and Pro-Poor Growth 152

1. Introduction 153

2. Trade Policy and Pro-Poor Growth 155

2.1 Channels of trade liberalization on poverty 155
2.2 Empirical evidence 159

3. Data 161

3.1 Indicators of trade policy and openness 161
3.2 Data on income inequality measures and additional
macroeconomic variables 163

4. Pro-Poor Growth 167

5. Econometric Specifications and Estimation 169

5.1 Econometric Specifications 169
5.1.1 System GMM estimation: level and first differenced equation 169
5.1.2 Growth equation: pooled OLS, fixed effects or random effects estimation 171

5.2 Econometric issues 172

5.3 Estimation strategy and results 175
5.3.1 Openness indicators and pro-poor growth: distribution effect 175
5.3.2 Openness indicators, interaction term and pro-poor growth: distribution effect 177
5.3.3 Openness indicators and pro-poor growth: total effect 180
5.3.4 Openness indicators, interaction term and pro-poor growth: total effect 183

6. Conclusion 184

References 188

Tables 192

General Conclusion 229


III Acknowledgements


First of all, I thank Professor Stephan Klasen, PhD, for his professional guidance and valuable
critics. Without his open-mindedness with respect to my research interests, the doctoral thesis
would surely not have taken place. Furthermore, I thank Professor Dr. Dalia Marin for her
willigness to be the co-supervisor.

I have benefited from discussions with participants of the empirical research seminar, the
faculty, and with conference members at CESifo, which I want to thank. In addition, I would like
to acknowledge John Harlin and Kelvin Hawthorne for their kindness to proof-read parts of my
work.

I am in deep debt of my father Eberhard Maier, without his bequest this doctoral thesis would
not have been possible. I also thank my mother Ursula Haseidl and my sister Andrea Rösler for
their moral and emotional support. Finally, I thank Marianne for participating in this exciting
adventure.


Munich, September 2004
















IV General Introduction

The search for poverty-reducing growth strategies is a perennial question in economics. While
economic growth is supposed to be one of the most critical determinant of poverty reduction,
growth-enhancing development strategies differ considerably with respect to its poverty effects.
Thus growth determinants should be examined by its poverty-reducing quality. The importance
of a pro-poor growth focus, however, is in stark contrast to its weak integration into
macroeconomic theory. Most models simply abstract from poverty issues of growth
determinants, looking only on aggregate effects. Since empirical evidence shows a remarkable
heterogeneity of poverty effects in the growth process of different countries, omitting poverty
aspects in the discussion of growth determinants is a rather euphemistic assumption.

Historically, the idea of pro-poor growth is preceded by discussions on broad-based growth at
the beginning of the nineties (World Development Report 1990), even if the idea of poverty-
focused growth dates back to the seventies (Chenery/Ahluwalia/Bell/Duloy/Jolly 1974). In
general, the term pro-poor refers to the idea that economic growth should be good for the poor
in terms of income, disposable resources or capabilities. However, there is considerable
ongoing discussion on an appropriate definition and measurement of pro-poor growth
(Kakwani/Pernia 2000, Anderson/White 2001, Bourguignon 2001, Eastwood/Lipton 2001,
Chen/Ravallion 2001, Kakwani/Son/Khandker 2003, Klasen 2003, Ravallion 2003). While none
of the proposed measures has so far set an international accepted standard, most pro-poor
concepts are income-based. As poverty is a complex and multidimensional phenomenon
(health, education, gender equity), income-based definitions would restrict the focus of poverty.
However, income-based measures of poverty can be justified due to mutual causality between
income poverty and most non-income measures of well-being, even if these linkages are not at
all perfect (Klasen 2003).

Pro-poor growth based on absolute poverty lines could be defined as a high (negative) growth
elasticity of a specific poverty measure with respect to per capita income or consumption
expenditure (Chen/Ravallion 1997, Bourguignon 2001, Ravallion 2001, Datt/Ravallion 2002) or
as a pro-poor growth index greater than one (Kakwani/Pernia 2000,
Christiaensen/Demery/Paternostro 2002). To compare pro-poor growth across countries, an
international standard poverty line would be necessary. International comparable poverty lines,
however, are only limited available and severely criticized by their construction (Pogge/Reddy
2002). In addition, the estimated poverty reduction would be sensitive to the value of the
absolute poverty line (Bourguignon 2001, Ravallion 2001, Chen/Ravallion 1997).

Another part of the literature measures poverty as the share of income of the poorest 20 per
cent. While the incidence of poverty is fixed in this approach, the variation of the share of
income of the poorest 20 percent has to be explained. Pro-poor growth can be defined

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