Human Capital Investment and Poverty Reduction over Generations: A Case from the Rural Philippines, 1979-2003

This paper attempts to identify a pathway out of poverty over generations in the rural Philippines, based on long-term panel data spanning for nearly a quarter of a century. Specifically, it sequentially examines the determinants of schooling, subsequent occupational choices, and current non-farm earnings for the same individuals. We found that an initial rise in parental income, brought about by the land reform and the Green Revolution, among other things, improves the schooling of children, which later allows them to obtain remunerative non-farm jobs. These results suggest that the increased agricultural income, improved human capital through schooling and the development of non-farm sectors are the keys to reducing poverty in the long run. It must be also pointed out that the recent development of the rural non-farm sector offers ample employment opportunities for the less educated, which also significantly contributed to the poverty reduction.

The dynamics of spending and absorption of aid : panel data analysis

In September 1999, the International Monetary Fund (IMF) established the Poverty Reduction and Growth Facility (PRGF) to make the reduction of poverty and the enhancement of economic growth the fundamental objectives of lending operations in its poorest member countries. This paper studies the spending and absorption of aid in PRGF-supported programs, verifies whether the use of aid is programmed to be smoothed over time, and analyzes how considerations about macroeconomic stability influence the programmed use of aid. The paper shows that PRGF-supported programs permit countries to utilize all increases in aid within a few years, showing smoothed use of aid inflows over time. Our results reveal that spending is higher than absorption in both the long-run and short-run use of aid, which is a robust finding of the study. Furthermore, the paper demonstrates that the long-run spending exceeds the injected increase of aid inflows in the economy. In addition, the paper finds that the presence of a PRGF-supported program does not influence the actual absorption or spending of aid.