THE IMPACT OF ECONOMIC GROWTH AND SOCIAL EXPENDITURE ON POVERTY REDUCTION. PANEL VAR ANALYSIS FOR SOME LATIN AMERICAN COUNTRIES, 2000-2019

Abstract

The aim of this paper is to analyze the impact of economic growth and social public spending on poverty reduction through a panel of eight Latin America countries along the period of 2000 to 2019. In order to do this, a Panel Vector Autoregressive (PVAR) model is applied. The results show that economic growth has the strongest influence on poverty reduction, in both short and long run; and, while the impact of social protection expenditure does not seem to be significant on short forecast horizons, it seems to be in the long run. According to our forecast error variance decomposition, around 40% of poverty variation is due to a change in economic growth; while almost 16% due to a change in social protection expenditure.