Inclusive Growth Policy Research Articles

Formal financial inclusion and digital mobile money adoption in sub-Saharan Africa: do bank concentration and competition matter?

ABSTRACT It is widely accepted that financial inclusion brings significant benefits to individuals, and thereby enhances the economic development of countries. This article examines the role of bank concentration and competition on access to financial services in sub-Saharan Africa through two competing channels, the efficiency channel versus the rent-seeking channel. We distinguish between formal financial services and the emerging digital mobile money technologies. The low level of banking competition and the striking expansion of mobile money in sub-Saharan Africa provide incentives to study and compare both phenomena. Using various competition indicators, we find that bank competition facilitates both banking and mobile financial inclusion. Moreover, bank concentration favours the adoption of digital mobile money. The results suggest that digital mobile money plays a complementary role by increasing mobile financial inclusion in countries that lack financial depth. Furthermore, we find that individuals face the same demographic barriers to both formal and mobile financial inclusion in sub-Saharan Africa: adults who are female, younger, less educated, and poorer are more likely to be financially excluded. We conclude that promoting bank competition should be a key component of the inclusive growth policy agenda of sub-Saharan African countries.

Developing a novel inclusive policy analysis framework based on capability approach and institutional analysis and development method

AbstractThis paper develops a novel framework to measure inclusive policy based on capability approach and institutional analysis and development method. In the process, it records its distinction of inclusive growth from earlier growth theories, particularly highlighting its economic and non‐economic dimensions. The paper inculcates consequential ethics in discussing inclusive growth. The proposed framework is conceptualised on the theoretical foundation of Amartya Sen's capability approach and Elinor Ostrom's IAD method. The framework allows theorists to develop more precise theories and models and derive empirical analysis of existing and proposed policies. The paper identifies the major limitations of the existing inclusive policy analysis methods which include disregarding the ‘noneconomic dimensions of inclusive growth’ (benefit share, participation, equality of opportunity). The existing methods endorses equality of opportunity from an arbitrary point to wrongly fulfil the inclusiveness dimension. Such an approach fails in sustaining moral and ethical rightness of equity. Further, the excising methodologies do not disclose the precise time of change in opportunities among the target population resulting into waste of policy resources. The proposed framework's novel contribution is integrating CA and IAD method to reveal the precise time of change in opportunity that occurs over time due to policy implementation. The framework will help policy makers to measure policy outcome and reduce waste of resource. Analysts and researchers can apply framework for empirical analysis to identify the inclusive growth policy or compare inclusive policy between various countries, states, and regions.

AN EMPRICAL LITERATURE REVIEW ON FINNACIAL INCLUSION

The review of literature gives an outline of the study's main topics. An examination of the available literature is expected in order to determine the progress achieved in the subject area and the gaps that the researcher must fill. So far, a vast number of researches on financial inclusive growth have yielded useful insights and policy recommendations. Despite the fact that some of the researches are extensive, there are still significant gaps. Many issues concerning unbanked people's access to finance, credit, and resources have not been fully investigated or targeted. While the academics' results, analytical methodology, and policy recommendations are noteworthy, the current study is a diagnostic attempt to determine the state, pattern, and prospects of financial inclusive growth. As a result, the present paper seeks to offer a quick overview of the research on what methodologies are necessary to include the unbanked population at both the international and national levels. Theoretical analyses of economic growth, economic disparities, and the relevance of human capital for inclusive growth policies give a sound foundation for recognising the importance of a new route of economic growth policies to maintain nations. The nature, scope, and effects of financial exclusion/inclusion are presented in the empirical reviews. Financial innovations are also discussed in the context of Financial Inclusion in the empirical reviews.

Poverty and the functional distribution of income in the input–output framework: in pursuit of strategies for inclusive growth

The eradication of poverty as proposed by the first Sustainable Development Goal is one of the main challenges faced by all countries, especially the underdeveloped and developing nations. In this paper, we develop an approach for integrating the input–output framework with a microsimulation model where consumption and income data are highly disaggregated and along with Miyazawa linkages. This allows us to identify how sectoral economic structure affects income distribution. This, in turn, provides information relevant to the inclusive growth policies that can create work opportunities for the low-income population and, thereby eliminating poverty. Results show how labor-intensive sectors might be important in ending poverty and in reducing inequality. They even show the set of activities that could best contribute to this goal via changes in the productive structure.

The Potential of Re-exports: A Probability for Fiji’s Trade Growth

This study investigates the significance of re-exports in Fiji. The dominance of the re-export of domestic exports is indisputable in Fiji; however, there is lack of literature concerning the performance of re-exports to total exports transiting the Fijian economy. This study aspires to fill that gap offering suggestions to strengthen the total exports of Fiji by diversifying the trade policies. Time series data is used for total exports, re-exports and domestic exports from 1985 to 2018 to establish an ARDL model. The model was subjected to diagnostic testing with a favorable outcome regarding the stability of the model for hypothesis testing. The findings re-affirm that re-exports are a significant predictor of Fiji’s total exports and trade growth. This research signifies the need for national policies to include the promotion of re-exports. Conclusively, the finding of this study is instrumental in updating or reshaping development policies for inclusive growth.

Determinants of Financial Inclusion of Urban Women: Evidence from Ahmedabad, India

<p class="Normal1">One of the utmost active practices is to adopt an inclusive growth policy to achieve economic growth. An inclusive growth means include the excluded population into all benefits. Financial inclusion is a financial upliftment process, to help poor, slum, backward and women to come out from the poverty trap. Financial inclusion means inclusion of excluded population to access formal financial services like savings, borrowings, insurance and pension from formal financial institutions. For constructing strong financial system, it is very necessary to know first that whether sources of financial services are actually reaching to the unreached people; the awareness among people for the formal financial services i.e., financial literacy and inclusion of the excluded population by providing banking services. Among socio-economic problems in India, gender inequality is one of the major affecting problems. A noteworthy access gap has taken place between male and female regardless of significant development in broadening access to formal financial products in the country. The main objectives of this research are to examine nature and extent of accessing major financial inclusion services including Government financial inclusion programs by urban women and to analyze the determinants of financial inclusion for urban women of Ahmedabad district (having highest urban female population in Gujarat). Primary data collection method is used through semi-structured questionnaire. Probit model is constructed to analyze the financial inclusion determinants of urban women of Ahmedabad district. Considered major financial inclusion services are opening bank account, savings, borrowings and insurance. Major finding of this study is that poor urban women are being considered as less benefitted from financial inclusion services, where in-migration, financial literacy and borrowings were found to significantly influence the participation of urban women in financial inclusion programs.</p>

Sustaining escapes from poverty

The objectives of this research are to identify the difference between sustained and temporary poverty escapes for policy and program design, based on research in Bangladesh, Cambodia, Ethiopia, Kenya, Malawi, Nepal, Niger, the Philippines, Rwanda, Tanzania, and Uganda. The method adopted is the q-squared method used in studies on the dynamics of poverty, embedded in a conceptual extension of the capability approach through a risk chain analysis. The results show that key livelihood factors conducive to sustained escapes include diversification of economic activities typically spanning agricultural and off-farm sectors, and sometimes involving rural-urban migration. Important tangible assets include general asset holdings of consumer durables, farm or business equipment, livestock, and electricity. Intangible assets include the completion of at least lower secondary education of the household head, good health, and different forms of social relationships and networks. However, while livelihood strategies help improve income and build assets necessary for resilience, various risks permeate. In these risky contexts, the study finds that the enabling environment is critical in determining whether households can ultimately sustain escapes from poverty. Interactive features of this environment that are conducive to sustained escapes include context-specific pro-poor policy and infrastructure, for example around livestock insurance, climate-smart agriculture alongside predictable disaster risk management, universal health coverage, and supporting a negotiated approach to norm change. Together, these features place an emphasis on collective risk management, beyond a focus only or even primarily on inclusive growth policies. The paper argues that it is essential to understand the circumstances in which people live, from the local (micro) up to the societal (macro) contexts that can influence their ability to sustain a poverty escape, and respond in ways that together address the multifaceted sources of risk and vulnerability, which in turn allows for the less interrupted development of people’s capabilities.

Terrorism and investment in Africa: Exploring the role of military expenditure

The aim of this study is to investigate the influence of military expenditure on the relationship between terrorism and investment in twenty-four African countries for the period 2001 to 2018. The study utilizes fixed effects regression with Driscoll and Kraay standard error and cushions the effect of simultaneity and reverse causality using the lags of the regressors as instruments. The empirical results reveal the negative effect of terrorism on both domestic investment and foreign direct investment (FDI). The study further reveals a negative net effect of military expenditure on the relationship between terrorism and investment. Furthermore, it was discovered that a threshold of 2% to 5% of military expenditure in GDP is required for military expenditure to offset the negative effect of terrorism on FDI. The study recommends that counter-terrorism initiatives be tailored more towards inclusive growth policies, increasing access to education, and improving the quality of governance.

Factors influencing poverty reduction in the mining sector in Zambia: A case of selected mines

The study focuses on how to reduce poverty by facilitating the inclusion of Zambian SMEs in the miningindustry and link them to global value chains. In the past 15 years, Zambia has adopted a series ofNational Development Plans aiming at the support of small and medium enterprises (SMEs). Despitethese plans, poverty levels are still high to over 60%. The main research question was what the barriersare that hold back local SMEs to join the Zambian mining chains and how to overcome them. The studyadopted an embedded multiple case study approach that included Lumwana, Konkola and Kansanshimines and the SMEs in the proximity of these mines. Primary data was collected through a surveyinvolving 150 members of the Mining Suppliers and Contractors Association of Zambia, and 35 indepth interviews with immediate stakeholders in the three selected mines, government authorities,NGOs, and experts. Data processing involved use of EQS for a structural equation modeling and selfadministered questionnaire for qualitative data. Data analysis framework focused on RMSEA values,FIT indices, and multiple regression analysis for quantitative data while theory construction involvedcoding the indicators that measure variables into themes, categories and subcategories which wereexpanded with detailed explanations, and thereafter summaries and conclusions. The conclusion of the study was that despite public and private support, SMEs continue to be excluded from supplying to the mine. The study recommends the formation of Zambia National content development and monitoring board for managing local content policies for inclusive growth, formation of Mining incubator to support SMEs upgrade to reach international requirements, formation of the mining commission of Zambia to implement mining policy, and form the supplier development working group to implement the private and public policies to improve capacity of SMEs to supply to the mines

The Twin Deficit Hypothesis in the MENA Region: Do Geopolitics Matter?

This paper examines the relationship between fiscal and external balances in MENA oil versus non-oil countries in the context of the twin deficits hypothesis (TDH) using Panel Vector Autoregression- Generalized Methods of Moments PVAR GMM estimation, Granger Causality and IRFs. The essence of this analysis is to assess the vulnerability of fiscal and external balances to oil price dynamics and regional geopolitics in the region. Results show that a twin-deficit problem exists in MENA oil-rich countries only while the problem does not exist in non-oil ones. This affirms the hypothesis that oil dependence results in high fiscal vulnerability to geopolitical shocks that automatically transmits to external balances. While a TDH isn’t proven to exist in non-oil countries, fiscal and external balances problems result from longstanding structural factors. A high reliance on tourism revenues and remittances as main sources of foreign currency receipts (together with poor tax administration and enlarged current spending bills) makes those countries more vulnerable to domestic and external shocks; reflected in both growing fiscal and current account deficits. A large imports sector and relatively poor exporting capacity also contribute to weakening external accounts. The main policy recommendations for MENA oil-rich countries rely in the importance of strengthening the non-oil sector in order to diversify domestic sources of revenues. Adopting flexible exchange rates is recommended to decrease the vulnerability of the external shocks to oil price dynamics. For non-oil MENA regions, fiscal consolidation, reforming current spending and strengthening tax administrations are crucial to improve fiscal performance. Export-led growth strategies and inclusive growth policies would also contribute to improving external accounts in the examined economies.

An Assessment of Inclusive Growth Policy as a Determinant of Unemployment Reduction in Nigeria: an Application of Autoregressive Distributed (ARDL) Bound Test Approach

An Assessment of Inclusive Growth Policy as a Determinant of Unemployment Reduction in Nigeria: an Application of Autoregressive Distributed (ARDL) Bound Test Approach

The Effects of Inflation on Economic Growth in Nigeria

The study investigated the effects of inflation on economic growth in Nigeria within the period 1990 to 2016. Secondary data for relevant variables were obtained from the CBN publications. The study adopted the use of unit root test, cointegration and VECM in estimating the data. The study found that inflation does not have significant effect on economic growth between 1990 and 2016 based on the significant level which was greater than 0.05. The result also shows that inflation is not significant in explaining the changes in economic growth between 1990 and 2016. The examination of their causal relationship also proved to be non-existence as their probability values are higher than the benchmark of 0.05. Meanwhile, a long run and short analysis was also conducted. The findings shows that the previous year’s deviation from long run equilibrium is corrected at an adjustment sped of 6.7 %. On the other hand, the short run coefficient of inflation is 0.070590. This suggest that holding other variables constant, in the short run, a percent change in inflation will on the average lead to 0.07 percent increase in economic growth (EGR) in Nigeria. Meanwhile, changes in the dependent variable (EGR)were explained by 35% changes in the independent variable (INF). It is thus recommended that government should push for dynamic monetary policy that can mitigate against inflation, when it becomes inimical on the long run. Since there is a long run relationship between inflation and economic growth, the government should not be much concerned on the impact of inflation but rather push for inclusive growth policies that can result in all round growth.

EVALUATION OF INCLUSIVE GROWTH AND DEVELOPMENT POLICIES IN CENTRAL AND EASTERN EUROPEAN COUNTRIES

The primary intension behind this study is to assess and compare policies that deliver inclusive outcomes to economic growth and development across economies of Central and Eastern Europe (CEE). The EU and Norway (the most inclusive country in 2018) were added into the study as a benchmark countries. As a result of the comparative analysis based on the World Economic Forum Inclusive Growth Policy and Institution Framework, we argue in favor of policies that would increase broad-based human economic opportunities and consequently both equality, and economic well-being of CEE economies. Positive strong influence on inclusive growth and development is associated with the employment and labor compensation policy that allows people directly increase their incomes; the basic services and infrastructure policy which is a necessary ground for present and future human and economic development; the asset building and entrepreneurship policy should provide diminishing inequality and rising economic opportunities by fostering medium and small business creation and enlarging possibilities of home and other asset ownership. In addition, an effective and inclusive redistribution state system of CEE economies should accentuate on supporting broad-based economic opportunities (like productive employment possibilities, asset building and entrepreneurship possibilities), along with infrastructure and human basic services development, rather than solely on social fiscal transfers.

The political economy of and practical policies for inclusive growth—a case study of Scotland

AbstractThe concept of ‘inclusive growth’ (IG) is discussed in a political economy framework. The article reports comparative analysis of economic and planning policy documents from Scotland, England and the UK and findings from expert workshops held in Scotland, which identify four key policy areas for ‘inclusive growth’: skills, transport and housing for young people; city-regional governance; childcare; and place-making. These policies share with the ‘Foundational Economy’ an emphasis on everyday infrastructure and services, but add an emphasis on inter-generational justice and stress the importance of community empowerment as much as re-municipalisation. Factors enabling IG policy development include: the necessary political powers; a unifying political discourse and civic institutions; and inclusive governance and participatory democracy.

Wishful thinking or wise policy? Theorising tourism-led inclusive growth: Supply chains and host communities

• Tourism contributes to employment overall, but precarious work conditions and low pay may limit opportunities for poverty alleviation. • The opportunities for tourism-led inclusive growth decrease as destinations are developed or redeveloped to maximise tourist growth and spend. • Economic linkages to local economies are weakened despite the clear potential for strengthening backward linkages in food and non-food sectors. • Low-income households and SME businesses are most affected by large-scale tourism projects with loss of land, business premises and livelihoods. • Privileging large capital, foreign firms and crony conglomerates is a regional trend and a major hurdle for tourism-led inclusive growth policy. Tourism is perceived as driving economic growth for developing countries by generating employment, income and government revenue. In debates over the relationship between economic growth and poverty alleviation, the inclusive growth paradigm emerged in World Bank, OECD and other development publications, becoming a UN Sustainable Development Goal (SDG 8). However, inclusive growth remains highly contested, and specifically, tourism’s role in economic growth has been little discussed. This paper contributes to the debate by interrogating tourism-led inclusive growth using evidence from developing economies in South-East Asia, a region with booming international tourism. It raises the fundamental question whether tourism-led growth can be inclusive in the short- to medium-term, drawing on evidence from fieldwork in Malaysia, Vietnam, Indonesia and Myanmar. Fieldwork utilised a rapid rural appraisal approach using qualitative methods, mainly semi-structured interviews. Although tourism can generate employment overall, this can be precarious and poorly paid, limiting opportunities for poverty alleviation. Tourism-led growth may widen inequalities in host communities and weaken backward linkages to the local economy, despite its potential for strengthening such linkages to food and non-food sectors. Remoteness and transportation also weaken such linkages. Low-income households and locally owned businesses are most affected by the construction of large-scale tourism projects – which although increasing overall tourist arrivals and expenditure - can result in the loss of land, business premises and livelihoods. In addition, privileging large capital, foreign firms and crony conglomerates is a regional trend and a major obstacle for tourism-led inclusive growth policy. Ownership patterns and destination governance also play critical roles in defining a destination’s direction/pace of development, steering it towards or away from tourism-led inclusive growth. Given tourism’s significance for many developing countries, the paper contributes to wider debates over inclusive growth both for theorising, and in its policy relevance for national development strategies and poverty alleviation.

INCOME TAXES IN TAX POLICY FOR INCLUSIVE GROWT: A THEORETICAL DIMENSION

Introduction. Inclusive economic growth in Government’s Action Program is proclaimed as a strategic priority for the development of the Ukrainian economy, which makes it urgent to study the ways to secure it. An important role in ensuring inclusive growth is played by the state tax policy including income taxes due to both the ability of taxes to influence on the distribution of income and wealth in society, and the possibility of using them to stimulate more productive labor, improve skills, and obtain education. Purpose of the article is to identify the ways to reform income taxes in the process of forming and implementing tax policies for inclusive growth. Results. The study showed that developing income tax design that meets the requirements of inclusive growth seems to be quite difficult, since its model, which is considered the least economic efficiency (progressive income tax), is the most fair, while the least fair model (proportional tax) is the most economic efficiency. Therefore, the process of approximating various models of personal income tax to the needs of ensuring inclusive growth involves solving various problems: for a progressive tax – finding ways to increase efficiency (primarily employment incentive tools, which is a key factor for building an inclusive economy), for proportional tax – the tools of increasing equity, for personal and corporate taxes on capital income – a combination of the measures directed to increase both equity and efficiency. The tools proposed by financial science for the fulfillment of these tasks and approaches to their practical application in the EU countries are identified. Conclusions. While financial science offers a wide range of tools that can help create income taxes that meet the goals of inclusive growth, each country should choose those tools that can be effective under its conditions. In the course of such choice the numerous factors influencing effectiveness of tax measures in a particular country should be taken into account.

The income inequality, financial depth and economic growth nexus in China

AbstractIncome inequality has increased in China despite rapid economic growth. Income inequality could impinge on future development, leading to social tension or political instability. Our study investigates the short‐run and long‐run relationship between three important macroeconomic indicators—income inequality, economic growth and financial depth. We utilise a two‐step procedure of ARDL bounds and Granger causality for the analysis. The bounds test indicates the presence of a cointegrating relationship between income inequality, financial depth and economic growth in the long run. In the second step, we utilise the Granger causality approach. Results show a bidirectional causality between financial depth‐growth and a unidirectional causality between inequality‐growth in the short run. In the long run, results reveal that growth and financial depth determine Gini. Our findings provide support for the inequality‐widening effect due to economic growth and higher credit provided to the private sector. We find no evidence of inequality‐narrowing or income‐equalising effect in the long run for the period of study. It is possible that the government's inclusive growth policies which started less than a decade ago have not taken effect for us to capture the inverted U‐shape income equalising effect significantly.

A Survey of Inclusive Growth Policy

Background: Since the latter part of the 20th Century, countries have been particularly challenged by the trade-off that exists between delivering generous welfare provisions and strong economic growth. Such dynamics have stimulated a need to better understand the causes of income inequality so as to better formulate policies that foster inclusive growth and reduce growing concerns surrounding income inequality. Method: Given its ability to succinctly summarize, analyze, and synthesize an extant body of literature from a certain genre of scholastic endeavor, this study utilizes a literature review as its proposed methodological approach. Results: From our assessment of the literature, we identified four key areas that contribute significantly to income inequality in both advanced and developing economies, these include: (i) pursuing skill-biased technological change; (ii) enhancing education systems; (iii) consolidation of globalization; and (iv) reform of the labor market and its relevant institutions. Conclusion: There is no silver bullet to achieving inclusive growth. Any policy manifesto must seek to offer a coordinated policy platform that looks to deal directly with the causes of inequality. In order to do so, consideration should be given to a range of policy areas including fiscal, education, trade liberalization, and labor market reforms.

Trade Openness, Inclusive Growth, And Inequality: Evidence From Jordan

This study examines the impact of trade openness, poverty, and inequality on inclusive growth in developing economies, taking Jordan as an example. Using panel data from 1990 to 2015, it examines the relationship between trade openness policies, growth rates, poverty, and income inequality in various provinces of Jordan. The empirical analysis assesses whether trade openness policies and reforms have enhanced income equality, and reduced poverty across provinces. Further, within the framework of inclusive growth, the study explores how per capita income growth has changed after trade openness reform. Different econometric techniques, such as the generalized method of moments, fully modified ordinary least square, and dynamic ordinary least square, are employed to assess the relationship between trade openness, poverty, inequality, and inclusive growth. To determine the univariate properties of the series under investigation, two panel unit root tests, based on Levin, Lin and Chu (2002) and Hadri (2000), are implemented. Both aggregate and provincial level panel data are used. Furthermore, two panel cointegration tests are employed—Kao (1999) and Pedroni's (1999) residual cointegration-based tests. The empirical results show that trade openness has a positive and significant effect on inclusive growth, though it is substantially weakened by poverty and income inequality at the national and provincial levels. This inequality is the likely cause for the small contribution of trade openness to inclusive growth. The effect of trade on inclusive growth is significantly positive for all provinces, but the contribution of trade openness varies according to local and provincial factors. Consequently, this study recommends better policies for promoting sustainable and inclusive growth—policies that amend inequality and reduce poverty are more likely to enforce the positive effect of trade openness on inclusive growth. Finally, the study contributes to existing literature, and assists local and international policymakers in understanding the effect of trade openness on inclusive growth at the country and provincial levels. To the best of our knowledge, this is possibly the first attempt to analyze inclusive growth in Jordan.

Commodity Prices and Intra‐Household Labor Allocation

AbstractVolatility in commodity markets poses a distinct risk to farmers in developing countries who rely on cash crop agriculture. We combine a time series of international coffee prices with a long‐running panel on coffee‐growing households in Vietnam to investigate coping mechanisms employed by farmers in a transitioning economy. We find that households cope with lower coffee prices by increasing wage labor of adults, with children and adolescents substituting for adults on the farm. Heterogeneity analysis indicates a stronger substitution pattern among women, ethnic minorities, and households with fewer assets. A variety of robustness checks corroborate these findings. Account of this finding should be taken in formulating and implementing social protection and inclusive growth policies.