Abstract
Poverty is perpetuated by increased levels of corruption. It diverts resources, which denies the poor masses their right to enjoy necessities to improve their living standards. To estimate the impact of corruption on poverty, the study relied on the random effect, fixed effects and the instrumental variable regression techniques. The estimates from the instrumental variable regression show that OLS underestimates the effect of corruption on poverty levels in Africa. That's, it shows that the OLS estimates are biased downwards due to inconsistencies as a result of the endogeneity of the levels of corruption. While the instrumental variable technique produces an estimated effect ranging from .805-1.073 increased levels of corruption on lived poverty index, the OLS estimates an impact within a range of approximately .058-.168. This paper confirms the governance model of the effect of corruption on poverty through its effects on reducing the credibility of public institutions. The study thus recommends that public institutions must be strengthened, financed and be equipped to be able to apply the rule of law, thereby helping reduce corruption.
Highlights
It measures how frequent people live without food, clean water, cash income, fuel to cook and medical care
The lived poverty index (LPI) is captured by the Afrobarometer survey, which asks respondents: Over the past year, how often, if ever, have you or anyone in your family: Gone without enough food to eat? Gone without enough clean water for home use? Gone without medicines or medical treatment? Gone without enough fuel to cook your food? Gone without a cash income? The LPI ranges from 0-4 reflecting nonexistent poverty levels to the extreme where people do not have access to necessities such as food, cash income, fuel to cook, medical care and clean water
It’s a continuous variable which measures how frequent people live without food, clean water, cash income, fuel to cook and medical care
Summary
In the study of poverty in a rising Africa, Beegle, Luc, Andrew and Isis [1], points out that even though there was a decline in the African population living in extreme poverty from 1990 to 2012, the continent still had an increased number of people living in extreme poverty due to a rapid population growth This is surprising, given that the continent has seen sustained growth levels. The LPI is an experimental measure of how people frequently live without necessities It measures how frequent people live without food, clean water, cash income, fuel to cook and medical care. The LPI ranges from 0-4 reflecting nonexistent poverty levels to the extreme where people do not have access to necessities such as food, cash income, fuel to cook, medical care and clean water. The LPI has been heavily relied on due to the difficulty to measure material poverty in Africa based on the absence of reliable household data on income Bratton, Mattes and Gyimah-Boadi [4]
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