The impact of government spending on rural poverty alleviation in the Philippines
Date
2007-10
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Abstract
The effects of government spending on poverty have been studied in the past by individually measuring the impact of each capital investment on poverty. There is also an apparent shortage of literature about how the government, through its fiscal policy tool that is government spending, is able to reduce the poverty in the Philippines especially in the rural areas where most of the poor reside. Thus, this paper, using the framework developed by Fan and his colleagues, establishes a simultaneous equations model linking public investments in agricultural research and development, roads, education and irrigation with poverty. The results show that urbanization, development of non farm employment and increases in agricultural productivity have negative and statistically significant impact on rural poverty reduction. Of these three factors, however, agricultural productivity contributes the most to poverty alleviation. Analyzing further in terms of returns in agricultural productivity and poverty reduction, the estimates reveal that investments in agricultural R&D yield the highest marginal returns. Therefore, spending in agricultural R&D contributes the most to agricultural productivity and poverty alleviation.
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Keywords
Government spending, Government fund, Public fund, Rural poverty, Poverty