Is Economic Growth a Panacea for Poverty Reduction in Emerging Markets?

The paper had two main objectives. Firstly, to investigate the impact of economic growth on poverty reduction in emerging markets. Secondly, to explore the effect of complementarity between economic growth and human capital development on poverty reduction efforts in emerging markets. In the available literature, it is no longer contestable that economic growth is necessary for poverty reduction to take place. However, what is still not yet conclusive in the literature is whether economic growth itself directly translates to poverty alleviation. Emerging literature argues that certain absorption capacities needs to be in place if economic growth is to contribute towards poverty reduction. It is against this backdrop that the current study is also investigating whether human capital development is a necessary precondition that must be considered for economic growth to translate into poverty alleviation in emerging markets. The study used panel data analysis methods, namely fixed effects, random effects, pooled ordinary least squares and dynamic generalized methods of moments (GMM) econometric estimation methods with secondary data ranging from 2000 to 2018. All the four econometric methods were used for results comparison purposes. The advantage of using GMM approach for robustness test purposes is that it considers the dynamic features of the poverty data (vicious cycle of poverty) and addresses the endogeneity problem. The panel data was easily downloadable in World Development Indicators database and was easy to use because it was denominated in a similar currency. To a larger extent, economic growth was found to have reduced poverty levels in emerging markets. The complementarity between economic growth and human capital development was also generally found to have had a deleterious effect on poverty in emerging markets. In other words, human capital development was found to be a channel through economic growth reduced poverty in emerging markets. All these results are in line with theoretical predictions. Emerging markets are therefore urged to implement economic growth policies to reduce poverty levels. They are also encouraged to accelerate the implementation of human capital development programmes so that the people can easily benefit (get out of poverty) or manage to benefit from economic growth of their countries.