Abstract
Studies have shown that the effectiveness of poverty alleviation funds is not always as intended; hence, there is an urgent need for researchers and policy makers to study the relationship between such funds and their impact on endogenous growth dynamics. This study focuses on the impact of these funds on human capital accumulation, which is an important driver of endogenous economic growth, and analyzes whether there is a threshold level for the efficacy of funds in countering poverty. This study examines the relationship between the Chinese government’s fund transfers to key poverty-stricken counties and the level of human capital in these regions by employing a fixed-effect threshold panel regression model on data from 592 counties from 2002 to 2015. Our study finds that the Chinese government’s fund transfers for poverty alleviation display a significant threshold effect. When funds are less than RMB 1291 per capita, there is a significant effect on local economic development; once this threshold is exceeded, there is a significant inhibitory effect instead. When the amount exceeds RMB 4469 per capita, fund transfers once again stimulate economic growth. This study enriches the theoretical understanding of the complex relationship between the use of funds in poverty-stricken areas and their impact on endogenous growth dynamics. It also provides useful suggestions for the effective use of poverty alleviation funds.
Highlights
This paper raises and examines the question of whether a threshold effect exists in the effectiveness of poverty alleviation funds
The threshold panel regression results show that fund transfers to the key counties for poverty alleviation across China display a significant threshold effect (Tables 2 and 4)
From 2002 to 2015, the per capita fund transfers to China’s key counties for poverty alleviation increased from RMB 1571 to RMB 1940, which is within the range of funds that have an inhibitory effect on future economic development
Summary
This paper raises and examines the question of whether a threshold effect exists in the effectiveness of poverty alleviation funds. It is necessary to transfer cash to help poor regions, especially under a decentralized institutional and fiscal system, some regions have become worse-off after receiving funds The reasons for this vary from corruption [4,5] to the waste of public services [6]. Researchers have argued that if the amount of funds transferred is too high, the funds may be detrimental to the poor regions where they are sent, as they may introduce corruption as well as induce a reluctance to participate in industrious work and increase dependence on assistance [8] In this situation, it becomes critical to examine whether there is a threshold level for the effectiveness of transfer funds
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