The paper analyses the prevalence of extreme and multidimensional poverty in line with the sustainable development agenda. In addition, the paper examines the drivers of extreme poverty while accounting for the potential spillover effect of poverty in the region.
The study adopts the pooled OLS with Discroll-Kraay robust standard errors to control for cross-sectional dependence. In addition, given the strong potential for endogeneity of poverty index, the authors also employ the generalized method of moments (GMM), which accounts for simultaneity and endogeneity problems, and the spatial error and lag models to control for all forms of spatial and temporal dependence since the factors that affect poverty disperse across borders.
The study finds that in addition to the traditional drivers of poverty (unemployment, low per capita GDP growth and public debt), poverty in Sub-Saharan Africa is a symptom of a deeper structural problem (lack of access to water and sanitation, high level of corruption and low level of financial development, and frequent economic busts). Likewise, the results from the spatial econometric specification show, consistently across all the specifications, that there is a substantial spillover effect of poverty across the region.
The main novelty of the paper is that the authors investigate the “economic shrinkage hypothesis,” and examined the potential negative spillover effect of poverty in the region.
