From measurement to financing: Social public investment, fiscal capacity and the multidimensional poverty–SDG nexus in Latin America and the Caribbean — A dynamic panel analysis, 2008–2022

The measurement of multidimensional poverty in Latin America and the Caribbean has matured considerably, yet the financing question — how much social public investment is required, and under what fiscal conditions its association with poverty reduction is strongest — remains comparatively underexplored. This article moves the agenda from measurement to financing. Using a constructed panel of seventeen Latin American and Caribbean economies observed annually over 2008–2022, we estimate the relationship between social public investment and the adjusted headcount of multidimensional poverty within a dynamic panel framework, controlling for income growth, inequality, urbanisation, remittances and the fiscal balance. We address the persistence of poverty, the endogeneity of social spending and cross-sectional dependence through two-way fixed effects with Driscoll–Kraay standard errors, dynamic fixed effects, and a system generalised method of moments estimator. Social public investment is robustly and negatively associated with multidimensional poverty: a one percentage point increase in the social- spending-to-GDP ratio is associated with a short-run reduction in the adjusted headcount of roughly 0.59 points and a long-run reduction of approximately 1.74 points, given substantial state dependence. The estimated marginal association between social investment and poverty reduction strengthens monotonically with fiscal capacity, suggesting that revenue mobilisation and spending effectiveness may be complementary rather than substitutable levers. We translate these estimates into financing scenarios for the Sustainable Development Goals: halving the adjusted headcount by 2030 would imply additional social investment of about 5.0 percentage points of GDP, or close to US$315 billion per year at regional scale, under the estimated long-run association. The findings reframe poverty reduction as a joint measurement–financing problem and offer an illustrative financing architecture for sustainable social development. Because the analysis uses a constructed country-year panel, the estimates are reported as indicative associations pending replication on fully observed official data.