Economic and Non-economic Determinants of Poverty in Developing Countries: Competing Theories and Empirical Evidence

Abstract

ABSTRACT This study conducts cross-national research on 97 developing countries to test competing hypotheses of poverty. Four major theories from the social sciences were examined, including (1) economic development and openness, (2) geographical and demographical disadvantages, (3) regime characteristics and war, and (4) social policy and human capital enhancement, to determine their explanatory power by modelling the ratio of the poor to total population in those countries. Poverty is defined by living below an income of US $1 or $2 a day. Both the incidences of poverty and the poor's income shortfall from the non-poor are analysed with ridge regression modelling. Empirical outcomes reveal that besides a country's income level, tropics, landlockedness, population growth, and secondary schooling opportunity are significant predictors of poverty reduction, whereas political factors (democracy, military spending, and war) and government social spending are only weak predictors. No evidence was found to support the economic openness proposed by the neoliberal school.