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A Sequence to Reverse Poverty: Institutions, State Capacity and Human Empowerment

3 September 2020
Publication Type: Working Paper
JEL Code: C68, E16, H31, I25, L91, O43, R10

This paper explores the fundamental or deep causes of poverty persistence, which remains a central challenge of the modern world. In theory, rising political participation in a democracy operationalises checks on state predation and cultivates development-enabling state capacity. This did not materialise post-colonial sub-Saharan Africa. The theoretical foundation of this premise is further brought into question by the development achievements of strong, capable non-democracies like Singapore and Hong Kong. This study uses a dynamic panel-data model specification and General Methods of Moments for a sample of 105 countries over the period 1981 to 2015 to explore a probabilistic development hypothesis that fuses broad institutionalism with modernisation human empowerment. In this model, regime-independent state capacity is relied on to trigger the transformational impetus associated with rising existential security, autonomy and individual agency. Ensuing shifts in societal value orientations towards emancipative mindsets then drive the progression towards prosperity and liberty. The results show that the poor-country in human empowerment, represented by mind-broadening education and emancipative mindset then drives the progression towards prosperity and liberty. The results show that the poor-country deficit in human empowerment, represented by mind-broadening education and emancipative values, dwarfs the shortcomings in all other drivers of prosperity, including exports and investment. The findings rule against geography and democracy as fundamental causes of poverty or prosperity.

Series title: Working paper 832
1 August 2020
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