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Reduction of global poverty through sector-specific investment

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  • Ivanic, Maros
  • Valenzuela, Ernesto
  • Ludena, Carlos

Abstract

This paper explores links between industrial investment in developing countries and its effect on global poverty in order to identify such a patter of investment that reduces global poverty most for a given amount of investment available. The link between investment and poverty is established in two steps as a link between investment and global price changes with the use of the GTAP model and data, and a link between price changes and global poverty using household survey data. The results suggest that an optimal investment option for one billion US dollars, at least from the point of view of poverty reduction, is to invest it primarily to the countries of Sub-Saharan Africa (namely Congo, Ethiopia and Nigeria) into the food producing and processing sectors. Such an investment is expected to move 9.4 million out of poverty, primarily in Sub-Saharan Africa. The paper further shows that if the amount of available investment were greater, its optimal allocation would change and it would include investments into other regions and industrial sectors. Even though it appears that the rate of poverty reduction through investment falls with greater investment, it appears possible to remove poverty by 300 million people—or about 25% of total world’s poverty—through a well directed investment of 1,000 billion US dollars.

Suggested Citation

  • Ivanic, Maros & Valenzuela, Ernesto & Ludena, Carlos, 2005. "Reduction of global poverty through sector-specific investment," Conference papers 331373, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    • Handle: RePEc:ags:pugtwp:331373
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    References listed on IDEAS

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