An Analysis of Regional Poverty and Factors Affecting it in Developed and Developing Countries

Document Type : Original Article

Authors

• samira motaghi ¹
• ramezan gholami ²
• samane talei ³
• salah ebrahimi ⁴

¹ Associate Professor, Department of Economics, Payam-e- Noor University. Tehran, Iran.

² Assistant Professor, Department of Management, Payam-e- Noor University.Tehran, Iran

³ Instructor, Department of Economics, Ardakan University, Ardakan, Iran

⁴ Department of Economics, Chamran University, Ahvaz, Iran

https://doi.org/10.22067/erd.2023.79302.1147

Abstract

 
1- INTRODUCTION
The adverse economic, social and political consequences of poverty have prompted governments to put improving the condition of the poor at the top of their priorities. Therefore, proper understanding of poverty and the factors affecting it has importance. But the important issue in this regard is the various definitions related to poverty, which are different depending on different approaches, including its regionality, and this issue creates the mentality that whether the phenomenon of poverty (for example, based on this approach) is actually. It is a regional and geographical category, in other words, the factors affecting poverty are different in different developed and developing regions (depending on the geographical situation of that region), or is poverty an international phenomenon and the factors affecting it are the same everywhere?
 
2- THEORETICAL FRAMEWORK
One of the basic issues of recent societies, which is a serious obstacle to development and progress, is poverty, which according to the 2030 report on sustainable development of the United Nations, its elimination is considered one of the 17 primary goals of sustainable development). Poverty is a major concern for policy makers; because its occurrence is directly related to the well-being of the population. In addition in economic aspects, the poverty situation in any society is also important in political and social dimensions, and any economic approach to poverty will inevitably have political and social consequences. Despite extensive studies on poverty, there is still no prevailing consensus on the main factors affecting poverty. Poverty has been looked at from an economic point of view and has attributed only economic approaches to itself in such a way that its main concept is only the lack of individual and household income compared to basic living standards. But this concept, since 1981, with the definition of poverty by the World Bank as the loss of an opportunity and not getting another opportunity as an alternative, including life, social, economic conditions, etc., took on a different definition. In Sen’s initial studies in 1982 and 1985, Sen proposed the concept of poverty in a more complete way, according to which, poverty is not only a lack of income, but also the lack of a fixed set of people's life capabilities, which some how. Deprivation refers and of course deprivation itself is a relative concept whose meaning is different in different places and times. Therefore, with a deeper insight into poverty, this category includes all types of deprivation, including economic, social, political, cultural, etc. The aforementioned deprivations are different, the poverty situation is also different in different societies.
 
3- METHODOLOGY
In this article, poverty and the factors affecting it have been investigated in different developed and developing regions and according to different geographical conditions. The method used in this research, in order to provide comparative models, is the ARDL panel method and the software used is Eviews 9, and the research data is extracted from the World Bank. The study areas include 30 countries (15 countries in the developing regions of the Middle East and North Africa and 15 countries in the developed regions of Europe and Central Asia). First, this study examines the impact of factors affecting poverty in macro and at the level of developed and developing regions. Then, by analyzing the impact of each region on poverty, it examines the issue of what effect does the geography of the region have on poverty? And is poverty in the regions a function of the geographical situation or not? In other words, are the factors affecting poverty different in different regions (depending on the geographical situation of that region) or is poverty an international phenomenon and the factors affecting it are the same everywhere in the world?
The model used in this research, according to the theoretical foundations and based on the model of Dano-Andonso and Sylvester (2016), is as follows:
 
 
POVit: poverty index of region i in time period t (in the current research, the percentage of people with a daily income of less than 1.9 dollars is known as poverty index); FDit: financial development index of region i in time period t (CPIA financial development index is proposed as this index); GDPit: GDP growth rate (in terms of purchasing power parity) of region i in time period t, which indicates the wealth level of the studied region; Xit: control variables of region i in time period t, which include inflation rate (INF), trade ratio (sum of exports + imports) to GDP (TRADE) and UE: unemployment rate; Therefore, the final model will be as follows:
 
 
4- RESULTS & DISCUSSION
Based on the results, it is clear that in the developing countries of the Middle East and North Africa, the coefficients of all the variables except the financial development variable have a high significance, so that the unemployment rate variable has a coefficient of (0.153) at the level of 5% and the gross production growth rate variables. Domestic with coefficient (-0.285), trade to GDP ratio variable with coefficient (-0.058) and inflation rate with coefficient (0.241) are significant at 1% level. On the other hand, in the developed countries of Europe and Central Asia, the coefficients of all variables except the unemployment rate variable are significant, so that the financial development variable with the coefficient (-0.213), GDP growth rate variable with coefficient (-0.213). The variable of trade to GDP ratio with coefficient (-0.117) and inflation rate with coefficient (0.098) is significant at 10% level. According to the results obtained for the countries of developing and developed regions, it is clear that:
The estimated models are significant and the results related to most of their coefficients are also highly significant. Only the financial development variable in the developing countries of the Middle East and North Africa is meaningless, which indicates that the financial development index has no effect on poverty in less developed regions. From another point of view, the reason for the meaninglessness of this index can be seen in the underdevelopment or in a better way, the inefficiency of the financial sector in the Middle East and North Africa regions. The signs of all the coefficients related to the independent variables of inflation rate, international trade, GDP growth, financial development and unemployment are the same in all models, except for the models in which the index is not significant. In other words, the increase in inflation and unemployment in both developed and developing regions (regardless of the geographical situation) increases the level of poverty; Meanwhile, improving financial development, economic growth and international trade reduces poverty. In the context of the error correction relationship, the value of the estimated ECM coefficient is higher for the group of developed countries. In other words, if there is a shock to poverty, it will return to its long-term trend faster in mainly developed countries than in less developed countries. This issue is probably due to more economic stability in countries with a higher level of development than in less developed countries.
 
5- CONCLUSIONS & SUGGESTIONS
The variables of economic growth, international trade, inflation, unemployment and financial development are the most important factors affecting the poverty index in developing and developed countries. However, the indicators of inflation and unemployment increase the level of poverty and the improvement of financial development, economic growth and international trade reduces poverty. Meanwhile, the negative effect of the economic growth coefficient on poverty, in both groups of developing and developed countries, indicates the confirmation of Stiglitz's trickle-down effect theory that economic development reduces poverty, and it is suggested that economic development and increased production growth The country has increased the wealth of the rich and in this process, a part of their wealth increase is gradually transferred to the poor. For example, as the wealth of the rich increases, the demand for production factors, especially the labor force of the poor, increases, and as employment increases and unemployment decreases, poverty decreases (the direct relationship between the unemployment rate and poverty also confirms this importance). The variables of economic growth, unemployment and inflation have had the greatest impact on poverty in different regions. In other words, poverty in different regions is mostly an economic category and other different approaches related to poverty are placed in the next levels of importance. In addition, this category, along with the different influence of governments on the level of poverty in developing and developed countries, is a good confirmation of the theory of political economists in relation to poverty at the international level, who state that the poverty of societies is focused on the mutual relationship between politics and economy and the role of governments and in general, the role of human action and especially the economic and political leaders, is in the poverty of the regions.

Keywords

• Trickle Down Effect
• Regional Poverty
• Economic Poverty
• Geography

Main Subjects

• Development and planning economics

References

References

Abiri, Gh. (2010). The Roots of Bank and Economy Poverty, No. 19, 65-67. (In Persian)

Abu Nouri, S.; Yarmohammadi, I., Arab, J. (2018). multidimensional approach to measuring poverty; Theoretical concepts and empirical evidence of Iran's economy during the years 1370-92. Social Welfare, 68(18), 9-41. (In Persian)

Alkire, S., & Foster, J. E. (2010). Designing the inequality-adjusted human development index.

Alkire, S., & Santos, M. E. (2010). Acute multidimensional poverty: A new index for developing countries.

Arzrum Chiller, N. (2004), Various Dimensions of Poverty in Iran, Economic Research Series, No. 27, Department of Economic Surveys, Central Bank of the Islamic Republic of Iran. (In Persian)

Chang, S. F. (2017). Frailty is a major related factor for at risk of malnutrition in community‐dwelling older adults. Journal of Nursing Scholarship, 49(1), 63-72.

 Chen, S., & Ravallion, M. (2013). More relatively‐poor people in a less absolutely‐poor world. Review of Income and Wealth, 59(1), 1-28.

Fitros, M. (1997). Investigating some factors that cause poverty in Iran's economy, collection of papers of the conference on poverty and poverty alleviation, volume 2, Program and Budget Organization, 35-47. (In Persian)

Franata, J.; Marwa, T., & Yusuf, M. K. (2017). Factors Affecting Poverty Level in South Sumatra Indonesia. Sriwijaya International Journal of Dynamic Economics and Business, 1(1), 119-132.

Galli, R., & van Der Hoeven, R. (2001). Is Inflation Bad for Income Inequality. The Importance of the Initial Rate of Inflation. Employment Paper 2001/29. International Labour Organization.

Griggs, D.; Stafford-Smith, M.; Gaffney, O.; Rockström, J.; Öhman, M. C.; Shyamsundar, P., ... & Noble, I. (2013). Sustainable development goals for people and planet. Nature, 495(7441), 305-307.

Heltberg, R. (2002). Does economic growth reduce child malnutrition. Copenhagen: Institute of Economics, University of Copenhagen.

Imam, M. F.; Islam, M. A., & Hossain, M. J. (2018). Factors affecting poverty in rural Bangladesh: an analysis using multilevel modelling. Journal of the Bangladesh Agricultural University, 16(1), 123-130.

Kakwani, N. (2003). Issues in setting absolute poverty lines. poverty and social development papers, No3.Asian development bank.

Khodadad Kashi, F.; Bagheri, F.; Heydari, Kh., & Khodadad Kashi, O. (2012). Measurement of poverty indices in Iran, application of types of poverty line, poverty gap, poverty index 1363-1379, Iran Statistics Center, Economic Statistics Research Group. (In Persian)

Kim, S. H.; Carvalho, J. P., & Davis, A. C. (2010). Talking about poverty: News framing of who is responsible for causing and fixing the problem. Journalism & Mass Communication Quarterly, 87(3-4), 563-581.

Mehryar, A. (1994). Poverty: Its Definition and Measurement, Journal of Program and Development, Volume 2, Number 8, 39-88. (In Persian)

Mirzaei, Mo, Kobriei. (2020). Demographic, economic and social factors affecting the poverty of urban households in Iran in 2015. Journal of Iran Demographic Society, 15(30), 231-259.

Nguyen, T. T.; Nguyen, T. T.; Hoang, V. N.; Wilson, C., & Managi, S. (2019). Energy transition, poverty and inequality in Vietnam. Energy Policy, 132, 536-548.

Oxley, H.; Burniaux, J. M.; Dang, T. T., & d'Ercole, M. M. (1997). Income distribution and poverty in 13 OECD countries. OECD Economic Studies, 55-94.

Raghofar, H., & Ebrahimi, Z. (2007). Poverty in Iran during the years 1368-1383, Social Welfare Scientific Research Quarterly, 6th year, number 24, pp. 55-82. (In Persian)

Sen, A. (1982). Poverty and famines: an essay on entitlement and deprivation. Oxford university press.

Sen, A. (1985). A sociological approach to the measurement of poverty: a reply to Professor Peter Townsend. Oxford Economic Papers, 37(4), 669-676.

Shokohi Fard, Abolhasani., & Salman Pour Zenouz. (2023). Measuring poverty in urban and rural areas (case study: West Azerbaijan). Land Geographical Engineering, 7(1). (In Persian)

Smith, A. (1776). An inquiry into the nature and causes of the wealth of nations: Volume One. London: printed for W. Strahan; and T. Cadell, 1776.

World Bank. (2018). Tarageted Porograms for the Poor Dwring Structure Adjusment: A Summary of a Symposium on Poverty, April.

Zhou, Y.; Guo, Y.; Liu, Y.; Wu, W., & Li, Y. (2018). Targeted poverty alleviation and land policy innovation: Some practice and policy implications from China. Land use policy, 74, 53-65.