Human capital, poverty, and income distribution in developing countries

Abstract

PurposeThis paper aims to examine the impact of the components of human capital on the extent of poverty and income distribution in developing countries.Design/methodology/approachData for all variables are from the World Development Report, 2006 and 2007. The least‐squares estimation technique in a multivariate linear regression is applied. It is noted that the introduction of interaction terms between income and the components of human capital yields better statistical results, as pointed out in the economic development literature.FindingsBased on data from the World Bank and using a sample of 40 developing economies, it is found that the fraction of the population below the poverty line is linearly dependent upon gender parity ratio in primary and secondary schools, the prevalence of child malnutrition, per capita purchasing power parity gross national income, the maternal mortality rate, and the percentage of births attended by skilled health staff. Using another sample of 35 developing countries, it is found that income inequality linearly depends on the same explanatory variables plus the infant mortality rate and the primary school completion rate.Practical implicationsStatistical results of such empirical examination will assist governments in those countries identify areas that need to be improved upon in order to alleviate poverty and improve the distribution of income.Originality/valueThis paper provides useful information on the impact of the components of human capital on the extent of poverty and income distribution in developing countries.