Poverty Reduction through Industrialisation, Economic Diversification and Growth in Low-income Countries: A Review of Literature and Evidence

Abstract

Poverty has consistently been a pervasive phenomenon tackled by public policies as it comes with its batch of intolerable levels of economic, social and political hardship deemed distressing for humankind. Thus, the strategy against this scourge gained increased attention within countries and across the globe. The poverty reduction strategy aims to pull people out of degrading living conditions. The debate on poverty reduction is of paramount significance because various approaches are suggested to address this issue, but with mixed results. That is because often, these approaches apply regardless of the circumstances of place and time. On this note, many keep attributing the success and failure of poverty reduction strategies in Low-Income Countries to the income distribution issue. Hence, this success and failure are thought to be linked to the adjustment between unlimited needs and the allocation of scarce resources required to address socio-economic issues formalised by poverty indicators. Engaged in another perspective, a great deal of literature and evidence suggests that the explanation of this success and failure could well be found upstream, namely, from the industrialisation, economic diversification and growth established as prominent tools to improve social welfare. Indeed, this literature and evidence contend that Low-Income countries are still struggling to manage poverty reduction as their economic circumstances exhibit weak industrialisation as well as inconsequential economic diversification and growth. This literature and evidence could be subject to scrutiny for a better understanding of poverty. Hence, this paper contributes to this debate by assessing selected literature and evidence. It establishes to what extent industrialisation, as well as economic diversification and growth, predispose Low-Income countries’ ability and inability to encounter effectively the issue of poverty. empirical regularities economic diversification associating economic diversification with employment, wage and consumption per capita. a lower diversification a lower labour coefficient of 0.5, lower coefficient of consumption per capita of 0.01 and lower wage rate, all led to the lower average income per capita, less than $1 per day, the role of diversification as a determining factor in combatting poverty. a empirical study using the cross-sectoral rebalancing of output approach scaled from zero to one, the Bank assessed the of diversification on between 1991 and 2018 in Sub-Saharan Africa, and the Middle East and North Africa and East Asia Pacific. This World Bank study shows that from 1991 to 2018, moved from 65 to 75% of GDP, construction from 7 to 9%, manufacturing from 11 to 12%, from 2 to 3%, and services from 14 to 17% of GDP (Ibid:135-140). The study suggests a low Export-Diversification-Poverty indicator of these countries reported to be less than 0.5 and thereby affirming that economic diversification is a key element of economic development and fight against poverty in which a country moves to a more diverse production and trade (Ibid). The strong of this study is that it evidences how a economic diversification in Low-Income has impeded poverty reduction strategy by subverting in Gross Domestic and the balanced development of all