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dc.contributor.authorMaier, Rolfen_US
dc.description.abstractTo reveal effects and consequences of high indebtedness on income poverty, this paper exploresempirically a linear and non-linear impact of external debt on pro-poor growth in developing andtransitional countries. To examine this hypothesis, we test the distribution effect of external debt to GDP,external debt to exports, and debt services to exports on the poorest 20 and 20 to 40 percent in a crosscountryapproach. In addition, we estimate the total effect, i.e. the distribution and growth effect, to analysepotential trade-offs between the impact of unsustainable external debt levels on poverty through overalleconomic growth and via distribution. To test the poverty effects, we collect an irregular and unbalancedpanel of time-series cross-country data on the first and second quintile of 58 developing and transitionalcountries for the period 1970 – 1999. We apply two econometric specifications, a growth equation and asystem GMM estimation, to cover econometric issues, cross-country variation and dynamic aspects ofwithin-country changes of the income of the poor.Empirical findings of the impact of the debt indicators on pro-poor growth have to be interpreted carefullydue to inconsistent results of the sensitivity analyses. Thus results do not indicate an optimal external debtlevel with respect to pro?poor growth. On the contrary, higher external debt levels are associated withnegative effects on the level of the income of the poorest 40 percent without exhibiting any significanteffects on the growth rates. Thus concise policy recommendations with respect to debt sustainability levelsand debt relief are difficult. A cautious conclusion would be that debt relief may affect the poor positively,but seems not to be a sufficient policy instrument for improved growth rates of the income of the poorest40 percent. This policy proposal would be in line with calls for more poverty-targeted capital inflows, aseven total debt relief would release only insufficient resources for poverty reducing activities. With thisinterpretation, however, we abstract from political economy and bad governance issues which may preventpoverty reducing debt relief initiatives.en_US
dc.relation.ispartofseries|aProceedings of the German Development Economics Conference, Kiel 2005 / Verein für Socialpolitik, Research Committee Development Economics |x23en_US
dc.titleExternal Debt and Pro-Poor Growthen_US
dc.typeConference Paperen_US

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