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Institutions and Policies for Growth and Poverty Reduction: The Role of Private Sector Development

Author

Listed:
  • Hasan, Rana

    (Asian Development Bank)

  • Mitra, Devashish

    (Syracuse University)

  • Ulubasoglu, Mehmet

    (Deakin University)

Abstract

This paper studies the effects of institutions and policies on economic growth and poverty, paying close attention to institutions and policies that relate to the overall climate and regulations under which the private sector operates. This paper finds that good governance, as measured by a strong commitment to the rule of law among other things, matters for poverty reduction largely through its effect on economic growth. Though not a panacea, less cumbersome regulations governing private sector operations, especially those pertaining to starting a business, can matter for both economic growth as well as poverty reduction more directly. While the impact of trade openness on growth is not clear, increases in trade shares have been associated with lower poverty. Furthermore, the size of the public sector has a strong negative effect on growth and can be bad for poverty alleviation. Finally, political freedom is not associated with either higher growth or lower poverty. Taken together, the evidence here suggests that the delivery of good governance and regulations, which facilitate the creation of new enterprises, is more relevant for growth and poverty reduction than the nature of the political system per se.

Suggested Citation

  • Hasan, Rana & Mitra, Devashish & Ulubasoglu, Mehmet, 2006. "Institutions and Policies for Growth and Poverty Reduction: The Role of Private Sector Development," ADB Economics Working Paper Series 82, Asian Development Bank.
    • Handle: RePEc:ris:adbewp:0082
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    References listed on IDEAS

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    Cited by:

    1. Bhanu Pratap Singh, 2021. "Institutional quality and poverty reduction in BRICS," Poverty & Public Policy, John Wiley & Sons, vol. 13(4), pages 335-350, December.

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    More about this item

    Keywords

    institutions; policies; economic growth; poverty reduction; private sector operations;
    All these keywords.

    JEL classification:

    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • O20 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - General
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth

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