Assessing the Relationship between Poverty and Economic Growth: Does Sustainable Development Goal Can be Achieved?

Zhu, Yu; Bashir, Shahid; Marie, Mohamed

Assessing the Relationship between Poverty and Economic Growth: Does Sustainable Development Goal Can be Achieved?

2022

Zhu, Yu | Bashir, Shahid | Marie, Mohamed

Income inequality, poverty, and economic growth are defined as an economy's exposure to exogenous shocks arising out of poverty. The study used various econometric estimations to measure the effect of inequality and poverty on economic development during 1990 to 2016 in Vietnam. Various econometric estimation tests confirmed the presence of a long-run association between inequality and poverty, and economic growth is the matter of poverty headcount ratio in Vietnam. When we added the investment-to-GDP ratio and the number of years in education, it decreases by -0.144. This is reduced to -0.05 when log population growth rate was added while the employment, the coefficient decreases to -0.04 and becomes statistically insignificant. We found a negative impact of poverty and we reassess the hypothesis's emphasis on inequality and poverty and their combining effect of inclusive economic growth. Interestingly our results verify the previous findings that inequality and poverty show a negative impact on economic growth. The negative impact of poverty and inequality on economic growth appears to be concentrated at the high poverty level. These findings recommend that poverty reduction policies should be beneficial in encouraging economic growth even if they do not decrease income inequality.

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