Can public policies help developing countries escape from the poverty trap?

Abstract

The main purpose of this study is to test the effectiveness of public education, health and labour market policies in reducing poverty in developing countries. We use different types of public interventions, namely minimum wages, child labour, government expenses, public education spending and public health spending. The empirical estimates are based on a balanced panel data set covering 34 developing countries from 2000 to 2019. For sensitivity and robustness of the findings, three different measures of poverty are used in fixed effect models. The study concludes that abolishing child labour, increasing government spending, and increasing education spending contribute to poverty reduction. However, raising health spending and the minimum wage do not have the desired effects. Finally, several policy conclusions are made to improve our understanding of why certain policy measures are designed and implemented in developing economies.