Breaking the Poverty trap

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Ronald U. Mendoza, Ph.D.,Asian Institute of Managment: Policy Center slides during the GDN 14th Annual development Conference.

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  • Young pupils in the Philippines risk their lives to get to school on time. ADB picture available here: http://www.adb.org/news/photo-essay/click-capturing-images-inclusive-growth
  • At 3% growth, and at 1.5% poverty elasticity of growth, it will take the Philippines 360 years to eliminate poverty.At 8% growth, and at 1.5% poverty elasticity of growth, it will still take the Philippines 130 years to eliminate poverty.At 10% growth (approximating China’s) and 5% poverty elasticity of growth (approximating Thailand’s), it will take 24 years to eliminate poverty in the Philippines.
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  • Breaking the Poverty trap

    1. 1. Breaking the Poverty TrapRonald U. Mendoza, Ph.D.Associate Professor of Economics
    2. 2. Social Protection•An investment rather than mere redistribution…•Strengthens citizenship and social cohesion…•Only temporary: the issue of “graduation”…•Fiscal sustainability…•Mainly addresses the human capital investments for thenext generation; but what about the present generation?•Risk of elite capture…
    3. 3. Source: Figure adapted from Balisacan (2011). Scenarios based onauthor’s calculations.How growth trickles down?-5-4.5-4-3.5-3-2.5-2-1.5-1-0.50Ravallion(2001),41DevelopingCountriesWorldBank(2009),EastAsia1990-2006WorldBank(2009),Thailand1990-2006WorldBank(2009),Indonesia1990-2006WorldBank(2009),Vietnam1990-2006WorldBank(2009),Philippines1990-2006BalisacanandFuwa(2004),Philippines1988-1997Balisacan(2007),Philippines1988-2003Percent change in poverty incidence arising from 1% change in mean incomeAt 3% growth, and at 1.5% poverty elasticity ofgrowth, it will take the Philippines 360 years toeliminate poverty.At 8% growth, and at 1.5% poverty elasticity ofgrowth, it will still take the Philippines 130 years toeliminate poverty.At 10% growth (approximating China’s) and 5%poverty elasticity of growth (approximatingThailand’s), it will take 24 years to eliminatepoverty in the Philippines.
    4. 4. Source: The Economist (2013).Can we eradicate extremepoverty worldwide?Inequality matters…World Bank: a 1%increase in incomes cutpoverty by 0.6% in themost unequalcountries but by 4.3%in the most equalones.
    5. 5. 5Schizoprenic economy?
    6. 6. Some elements ofinclusiveness?•Inclusive human capital investments (the startingpoint)…•Building resilience in a crisis-prone world…•Sustainable growth: shifting from (primarily) extractiveand rent-based growth to innovation and productivitybased growth…•Competition and industrial policies: striking the balance(over time) between state and market; and between largeand small enterprises – while preserving equity, efficiencyand stability aspirations of society

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