Economic growth, inequality and poverty: empirical evaluation for the bolivian case

Abstract

Frequently attempts are made to prioritize economic growth over income inequality and poverty, considering them opposing objectives, although a contrary position suggests that, to guarantee high levels of economic growth, the equitable distribution of income must prevail to reduce poverty levels. The objective of the research is to identify the impact of per capita economic growth in Bolivia on inequality in income distribution and poverty in the period 1989-2019. The generalized model of moments in two stages is specified, and the results show that the coefficient of GDP percapita is negatively related to the Gini index and Poverty, while the Gini index has a positive relationship to Poverty in both roles. In the first stage it is found that an increase of one unit in GDP per capita and a reduction of one unit of Poverty leads to a decrease of 0.06 and 0.01 units in the Gini index. For the second stage, given a unit increase in per capita GDP and a unit decrease in the Gini index, a reduction of 5.26 and 104.70 units in Poverty is generated. The of both functions indicates that 72 to 73 percent of the changes in the Gini index and in Poverty are caused by the growth of GDP per capita. Also, it is seen that inequity in income distribution makes it difficult to reduce income poverty, which is usually found in countries with high initial levels of income inequality or, on the contrary, in those with a pattern of distributive growth that it favors those who are not poor.