Sustainable Utilization of Financial and Institutional Resources in Reducing Income Inequality and Poverty

Chen Pinglu,Atta Ullah,Zhao Kui,Saif Ullah,Saba Khan

doi:10.3390/su13031038

Abstract

This study aims to determine the role of globalization, electronic government, financial development, concerning the moderation of institutional quality in reducing income inequality and poverty in One Belt One Road countries. The electronic government and regional integration of the economies of the One Belt One Road countries has increased globalization and can play a vital role in reducing income inequality and poverty. However, this globalization and digital transformation of government systems can only be beneficial in the presence of good institutional quality. The sample includes 64 One Belt One Road countries from 2003 to 2018. We employed a two-step system generalized method of moment (Sys-GMM) and a robustness check through Driscoll–Kraay standard errors regression. Our findings show that globalization, economic growth, e-government development, government expenditure, and inflation have a statistically significant and negative impact on income inequality and are key to eradicating income inequality and poverty. On the other hand, financial development, gross capital formation, and population size positively influence income inequality, which causes an increase in poverty and income inequality as financial development and population levels increase. Moderating variable institutional quality also positively impacts income inequality, which means that institutional quality in Belt and Road Countries is weak, as they are mostly developing countries that need to improve their systems. Moreover, the marginal effect also revealed that institutional quality has a corrective effect on the factors’ relationship with income inequality. Our findings endorse and conclude that globalization and e-government development improve economic growth and eradicate poverty and income inequality by boosting digitalization, investments, job creation, and wage increases for semi-skilled and unskilled human capital in Belt and Road countries. The sustainable utilization of financial and institutional resources plays a vital role in reducing income inequality and poverty in Belt and Road countries.

Highlights

The Sustainable Development Goals (SDGs) proclaimed a new goal in September 2015 to eradicate poverty at an extreme level by 2030, as determined by the proportion of the population surviving on less than $1.25 a day
The global extreme poverty database reported in the revised report of 2017 that it is recognized that poverty is a result of a variety of dimensions, including societal, party-political, and financial, and many scholars suggest that sustainable economic growth can be an essential tool in poverty reduction, which needs to be addressed in emerging countries
Our study finds that government expenditures have, on average, a less negative impact on income inequality, which is similar to the findings [1,12,13]

Summary

Introduction

The Sustainable Development Goals (SDGs) proclaimed a new goal in September 2015 to eradicate poverty at an extreme level by 2030, as determined by the proportion of the population surviving on less than $1.25 a day. Zero poverty is the number one goal of sustainable development, which is a complex matter, and recently only a few studies have explored the impact of several factors on income inequality and poverty alleviation. The digital transformation and regional integration of the economies of the One Belt One Road countries have increased globalization and can play a vital role in reducing income inequality and poverty. This globalization and digital transformation can only be beneficial in the presence of institutional quality. Researchers should explore income inequality and poverty factors [3]

Objectives

Methods

Results

Discussion

Conclusion