Does government spending affect income poverty? A meta-regression analysis

Journal articles or issues
October 2017

This paper presents the results of a meta-regression analysis of the relationship between government spending and income poverty, with a focus on low- and middle-income countries. Through a comprehensive search and screening process, it identifies a total of 19 cross-country econometric studies containing 169 estimates of this relationship.

It also finds that the size and direction of the estimated relationship are affected by a range of factors, most notably the composition of the sample used for estimation, the control variables included in the regression model, and the type of government spending. Overall, there no clear evidence that higher government spending has played a significant role in reducing income poverty in low- and middle-income countries. This is consistent with the view that fiscal policy plays a much more limited redistributive role in developing countries, in comparison with OECD countries.

In addition, it finds that the relationship between government spending and poverty is on average less negative for countries in Sub-Saharan Africa, and more negative for countries in Eastern Europe and Central Asia, compared to other regions. We also find that the relationship is less negative for government consumption spending, in comparison with other sectors.

Finally, it finds some evidence indicating the possibility of publication bias.