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Poverty reduction and good governance: Evidence from Islamic Development

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Global Journal of Quantitative Science Vol. 3. No.3. June 2016 Issue. Pp.30-44

Poverty reduction and good governance: Evidence from

Islamic Development Bank member countries

Bukhari M. S. Sillah

Chief Economist Complex, Islamic Development Bank.

Abstract This paper attempts to highlight the importance of good governance in the fight against poverty. It employs 2014 data to describe the relationships between governance indicators and eight poverty indicators. The governance indicators of the World Bank and Transparency International are deployed as governance variables. It is found that the unaccountable and corrupt countries see their infant mortality increase, income poverty increase, increasing number of their urban population become slum dwellers; and water, electricity and education become reserved for the lucky few. When countries free voices to hold the representatives accountable, implement regulation and rule of law equitably, and maintain efficiency and effectiveness and stability, then the limited economic resources will be used correctly to fight poverty. Accountable and corruption-free governments are found to reduce poverty better than the unaccountable and corrupt governments. The fight against poverty needs two vital conditions as the findings here indicate. They are expansion of per capita GDP as a necessary condition, and good governance for the administration of the economic resources as a sufficient condition. Good governance is found to be particularly relevant for the reduction of under-five mortality, improvement of living conditions (reduction of urban slum dwellers) and increased access to clean water. This implies that development institutions and agencies should set governance targets when providing financial resources in the fight against poverty. This fight is won and sustained not only with provisions of financial resources but also with attainment of good governance in terms of accountability and transparency. Introduction This paper tries to explain and answer the dilemma that could face development agencies. Where should a development agent start in tackling poverty? Should the agency start by building good governance then bring economic development to address poverty? Alternatively, should the agency start by increasing per capita incomes of the

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poor, and as they get out of poverty, the governance problem would solve itself? It means that when people are poor they make irrational economic decisions, which induce bad governance from the individual level up to the state level. Some answers to these questions will be what this paper attempts to provide. The answers should assist the development agencies in prioritizing their development resources between poverty alleviation and governance support. When MDGs were launched in 2000, governance was apparently missing. Many researchers and institutions argued that the absence of governance as indicators and targets was in part responsible for the off-track performance of countries on MDGs. Thus, Goal 16 of Sustainable Development Goals touches substantially on good governance and sets 12 targets to be met by 2030. This underscores the important role good governance plays in sustainable development. The analysis of this paper will be both descriptive and empirical to ascertain a link between poverty reduction and good governance within the IDB member countries. Objectives: To describe the performance of member countries on poverty reduction in the light of good governance. To estimate empirical relationships between poverty and good governance. Expected contributions: The findings of this paper should add to the debate that good governance as a goal and targets should not be missing in any development plan IDB’s 10 Year Strategic Framework has prioritized governance in its mission for the member countries. The findings of this paper will provide evidence for the areas of improvements in member countries. Scope of analysis:Poverty as defined by UN Commission on Sustainable Development, which in 2007 identified poverty as a theme with six sub-themes of income poverty, income inequality, sanitation, access to drinking water, access to energy and living conditions. These sub-themes do not include health and education. In line with Oxford Poverty and Human Development Index, this paper adds health and education dimensions of poverty to have in total eight sub-themes. The indicators of these sub-themes will be used to analyze the performance of member countries. Good governance has been defined in many ways. The World Bank governance indicators have summarized good governance into six indicators namely accountability, political stability, government effectiveness, rule of law and control of corruption. For the World Bank, good governance is judged against accountability, transparency, rule of law and participation. This paper will confine itself to three indicators of governance, and they are participation, control of corruption and accountability. The table below is extracted from Sustainable Development Indicators revised by UN Commission on Sustainable Development Report 2007, we adjust the dimension of poverty by including health and education from Oxford Poverty and Human Development Index, and we add participation and accountability under dimension of governance. Each dimension of poverty will be analyzed in relation to the governance factors. The table below gives guidelines for the variables of interest the paper will investigate and analyze.

Table 1: poverty and governance measures by some development agencies

Variable Dimension Measure

Income poverty % population living on less than $1.9 a day

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Poverty Inequality poverty

Gini index

Sanitation poverty

% population using plumbed sanitation

Water poverty % population accessing clean water

Energy poverty % population accessing electricity

Living poverty % of population who are urban-slum dwellers

Health poverty Under-5 mortality

Education poverty

Adult literacy

Good

governance

Participation Voter turnout as % of voting age population to be sourced from Institute of Democracy and Electoral Assistance

Accountability Summary five governance indicators of the World Bank namely voice/accountability, rule of law, regulatory quality, effectiveness, and stability

Control of corruption

Corruption perception index of Transparency International

Source: UN CSD report 2007 and author’s adjustments Literature review Why do people become poor? Or why are some people poor and others rich? This is an old question that Adam Smith asked at nation-State levels. It is a new question that development institutions are grappling with at both micro-society and Nation-State levels. The literature has advanced numerous answers for the question; and yet no conclusive agreement on what causes poverty. Some blame it on the poor themselves as proclaimed in the poverty thesis of Lewis (1970). He accuses the poor of individual deficiency that holds back the poor in the market competition. Patterson (200) and Edgerton (200) have also supported this line of narration. They argue that poverty is a cultural product. It starts with an individual deficiency in some form of physiological and mental development, and as a result the individual becomes less educated and less healthy. The children he brings will become further less educated and less healthy. As this conditions persist, they adapt their behaviors to create interdependent generations that sustain the culture of poverty, Jordan (2004) and Bradshaw (2006). This culture can then form the form political institutions, which condition the economic institutions that sustain the conditions of poverty. This argument holds that poverty happens by accident at an individual level, it then evolves into culture of poverty that produces political and economic systems, which act to reinforce conditions of poverty. To solve poverty from the viewpoint of this argument is to prevent or eradicate the accidents of poverty. That is, the poor should be empowered economically so that he can become more educated and healthier. Seemingly, the Millennium Development Goal of poverty reduction was premised on this hypothesis. No goals or targets were provided for governance institutions, because they were not viewed seriously as a cause or source of poverty. The counter argument to the culture theory of poverty holds that poverty is not by accident, rather it is man-made, and it is institutional, embodied in political governance.

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Acemoglu and Robinson (2013) believe that political intuitions define the economic systems a country has. They drew on the example of Nogales City, which is half-American in the north, and half-Mexican in the south. Due to different political systems between United State of America and Mexica, the two halves of the city developed two different distinct economic systems, and the American Half became rich, and the Mexican Half became poor. No cultural differences between the two halves, and thus it clearly negates the cultural theory of poverty. This is why the Post-2015 Agenda admitted that poverty is not by an accident, rather it is a product of policy and power distortions that generate discriminations, exclusions and injustice. International Transparency report 2015 concludes that the reason for non-attainment of MDGs in some countries was due primarily to bad governance and corruption. Evan al et (2013), in reviewing the literature on governance, growth and poverty reduction, find that growth is necessary for poverty reduction but without good governance the growth will not be pro-poor. Without good governance, we may end up having poverty professionals, who make living out of the poverty reduction programs, Lee (1985). They will organize themselves to lobby for increasing funding for their professions rather the fight against poverty. This was the case discovered by Palmeter (2011) in the case of the First Nations in Canada and by Acemoglu and Robinson (2010) in the case of Absolutist and Patrimonial system of African Elites. How does then good governance relate to poverty? It depends on how good governance is defined and measured. Mere existence of good governance institutions do translate into poverty reductions, unless the governments transform them into action. This transformation is what measures good governance. The table summarizes some measures of good governance by some development institutions: Table 2: Measures of Governance

Institution Measures / judged by

World Bank Accountability Rule of law Control of corruption Government effectiveness Political stability Regulatory quality Good governance to be judged by: Accountability, Rule of law, Transparency and Participation

Asian Development Bank

Good governance is judged by: Accountability, predictability, participation and transparency

African Development Bank

Good governance to be judged by: Accountability, transparency, control of corruption, participation, legal and judiciary reform

UNDP Good governance to be judged by: Rule of law, transparency, responsiveness, equity, effectiveness and efficiency, accountability and strategic vision.

Source: summarized from IFAD Executive Board 67th Session, Rome, 8 – 9 Sept. 1999 The empirical evidence on the relationship between the measures of governance and the poverty reduction is not conclusive. Three issues could be responsible for the inconclusiveness. One is the reliability of the measure of governance, Evan and Ferguson (2013), and another issue is the time length the governance may take to have a meaningful impact on poverty reduction, Grindle (2004). More importantly, some governance imperfections were found acceptable or helpful in the development of some

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countries, such as South Korea, Taiwan, and Singapore. On the other hand, good governance is credited for the transformations of countries such as Botswana, Chile, and Costa Rica, Kaufman (2008). The World Bank research (2008) shows that countries that improve on the governance can increase their national income four times and have their infant mortality fall by 75%. This quadruple fold of improvements resulting from good governance is termed “400 percent governance dividend” by Kaufman (2008). Three measures of good governance namely participation, control of corruption and responsiveness are found to contribute significantly to poverty reduction. Narayan (1995) and Sham el at. (1995) found participation of the beneficiary in the decision making to improve performance. In reviewing the literature on governance-poverty nexus, Chetwynd et al (2003) found corruption to be a significant factor that exacerbate the situation of poverty. Sebududu (2010) concludes that government responsiveness and accountability were instrumental in the economic transformation and poverty reduction of Botswana. For many Sub-Sharan African countries, corruption and lack of participation are found to sustain the conditions of poverty, Abdae-Karanke (2014). This paper will add to the debate and attempts to provide new evidence on the poverty-governance nexus. It confines itself to control of corruption, accountability, and participation as measures of good governance. These measures are found to be the common denominations among many development institutions on how good governance is measured and judged. There are limited data on other measures of governance, such as strategic vision, equity, predictability and judiciary reforms, and hence the empirical models cannot include them in the analysis. Descriptive Analysis In this section, we produce the statistical summaries of the data and graph the poverty measures against the governance indicators. In this we can visualize the hypothetical relationships between the two variables. It is assumed that poverty can be explained by economic growth and governance. Improvements in economic growth, and good governance should translate substantially into poverty reduction in its multidimensional perspectives. Multidimensional poverty index of OHPI for the latest available data on IDB member countries is used to represent poverty variable. It measures the level of deprivations people face in terms of health, education and living. Real per capita GDP 2014 is used to explain the relevance of economic development in poverty reduction. Three Governance variables are used in this paper. They are participation in decision making, corruption and accountability. Participation is measured by voter turnout as a percentage of voting age population for the most recent data from the Institute for Democracy and Electoral Assistance (IDEA); corruption is measured by corruption perception index 2014 from Transparency International; and accountability measure comes from the World Bank Governance Indicators 2014. These measures range from 0 to 100, with 0 indicating the poorest result and 100 indicating the best result. The hypothesis is that if governance is relevant for poverty reduction in IDB member countries, then higher values of governance measures should be associated with lower poverty. That is, countries with better governance should have lower infant mortality, better access to electricity, better access to safe drinkable water, better access to

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plumbed sanitation, lower urban percentage of slum dwellers, higher literacy, and less people living on $1.9 a day. We use the available data on IDB MCs to explore this hypothesis. Table 3: summary statistics of the data Variable Observations Mean Std. Dev. Min Max

Under-five mortality 49 54.32245 37.69348 6.5 142.9

Income poverty at $1.9 35 31.18286 25.86302 0 80.4

Multidimensional poverty index 40 21.80191 18.43146 0.06341 60.46266

Urban slum dweller 35 47.17429 23.9402 7.3 91.6

Access to clean water 50 84.018 14.71267 50.8 100

Access to plumbed sanitation 52 63.51731 33.20896 10.8 100

Adult literacy 38 71.74474 24.15407 15.5 99.8

Access to electricity 51 69.9902 33.4957 6.4 100

Accountability 52 31.04501 16.74481 4.052671 68.41107

Corruption perception index 51 32.94118 12.05722 11 70

Participation rate 48 50.51333 22.62732 12.17 98.41

Table 3 above presents the summary statistics of the data. It shows that the under-5 mortality rate ranges from 6.5 per 1000 live births in Bahrain to 142.9 per 1000 live births in Chad. It varies significantly from one country to another at a standard deviation of 37.7 mortality per 1000 live births. Similarly, income poverty, urban slum dwellers, access to plumbed sanitation, adult literacy and access to electricity, are highly variant from one member country to another. In Azerbaijan no income poverty exists, and in Mozambique 80.4% of the population live on less than $1.9 a day. In Suriname only 7.3% of the urban population live in slums, and in Sudan 91.6% of the urban population live in slums. In Kuwait and Saudi Arabia 100% of the population has access to plumbed sanitation; and in Niger only 10.8% of the population can access plumbed sanitation. Azerbaijan has 99.8% adult literacy, while in Niger only 15.5% of the adults can read and write. Populations in seventeen member countries out of the 51 observations have 100% access to electricity, and in Chad only 6.4% of the population has access to electricity. It shows that member countries are substantially different as poverty indicators as concerned. This variation however diminishes among the members when it comes to governance indicators. Member countries on average score poorer on accountability and corruption at 27.5 and 30 respectively than the world average of 49.6 and 42.6 respectively. The most accountable member country is United Arab Emirates at a score of 64.4% and it is also the most corruption free member country at a score of 70%. These are the highest governance scores of accountability and corruption that IDB member countries could attain in 2014. Majority of the member countries fall below 50% score on accountability and corruption. The least accountable country is Syria with 4.053%, and the most corrupt country is Sudan with 11%. Participation in decision making is measured here as the voter turn as a percentage of voting age population. From 48 observations, the participation rate ranges from 98.4% in Uzbekistan to 12.17% in Kuwait. In the next table, we present the Spearman

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correlations. It provides us with the degree and signs of associations between governance indicators and the poverty measures. Table 4: Correlations between governance and various poverty measures

Variable Under-5 mortality

MPI Income poverty $1.9

Inequality

Slum dweller

Access to Clean water

Access to Electricity

Access to Sanitation

literacy

Accountability

Obs.

49 40 35 33 35 50 51 52 38

Rho -0.5247

*

-0.245

6

-0.489

9*

0.0256 -0.407

2**

0.6029*

0.2498*

**

0.3667* 0.3234**

P-value

0.0001 0.1266

0.0028

0.8877 0.0152

0.0000

0.0771 0.0075 0.0477

Corruption Obs.

48 39 34 32 35 49 50 51 38

Rho -0.4351

*

-0.113

6

-0.383

2**

0.1181 -0.375

1**

0.5670*

0.1778 0.3322** 0.2013

P-value

0.0020 0.4910

0.0253

0.5197 0.0264

0.0000

0.2168 0.0172 0.2256

Participation

Obs.

47 39 34 32 34 44 48 46 38

Rho 0.0350 -0.086

2

0.1312

-0.1489 -0.013

0

-0.097

2

0.0719 -0.0914 0.1680

P-value

0.8154 0.6017

0.4594

0.4162 0.9419

0.5302

0.6274 0.5458 0.3134

* = significant at 1%, **= significant at 5%, and ***= significant at 10% Accountability ranges from 0 (least accountable) to 100 (most accountable) Corruption ranges from 0 (most corrupt) to 100 (most clean) Participation ranges from 0 (least participatory) to 100 (most participatory)

The table above reveals that accountability is an important governance measure that associates significantly with several poverty indicators. The significant associations have the correct expected signs. The accountability is negatively associated with under-five mortality, income poverty, slum dweller, and positively associated with access to clean water, access to electricity, access to plumbed sanitation, and adult literacy. Corruption index, which measures the degree of transparency of a country is found to be negatively and significantly associated with under-five mortality, income poverty, slum dweller, and positively associated with access to clean water, access to electricity, access to plumbed sanitation, and adult literacy. Participation rate has no significant association with any poverty indicator. The accountability variable here is a summary index of five World Bank governance indicators (excluding the control of corruption),

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correlates 87% with the corruption perception index of Transparency International. Thus, we can interchangeably use the two indicators to avoid repetitions. We use graphs to visualize some of the significant associations in table 4. Figure 1 illustrates the relationship between the accountability and under-5 mortality. Ordered from the most accountable to the least accountable, it reveals that generally as countries become less accountable the incidence of infant mortality increases. The most accountable countries in the observations are United Arab Emirates and Malaysia, and they have low infant mortality. Benin is an exception, where it is highly accountable but its infant mortality is very high. The least accountable countries such as Sudan and Chad face high incidence of infant mortality; Syria is an exception with low accountability and low infant mortality. These exceptions indicate that governance is important for the poverty reduction, but it is not a necessary condition; and this will be further investigated in the empirical analysis.

Figure 2 shows that generally as accountability diminishes in a country, the income poverty becomes more pervasive. Figure 2 also discloses the complex relationship between governance and poverty. The most accountable country cannot be the country with the highest incidence of income poverty, and the least accountable country cannot be the country with the least incidence of income poverty. But, relatively higher accountable country can have higher incidence of income poverty. For example, Senegal is more accountable than Morocco and Azerbaijan, and yet these two countries have lower income poverty than Senegal has. That is, it takes more than governance to fight poverty.

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Figure 1: Accountability versus under-5 mortality

Accountability U5M

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The relationship between governance and poverty becomes highly blurred when we look at figure 3. In this figure even least accountable countries appear to have high adult literacy. Table 3 does give a significant positive correlation between accountability and adult literacy. Thus, the figure should have shown the adult literacy to diminish when accountability decreases.

In figure 4, the negative relationship between accountability and urban slum dwellers becomes more evident as the accountability decreases substantially.

020406080

100

Figure 2: Accountability versus income poverty

Accountability incomepoverty $1.9

0

10

20

30

40

50

60

70

80

90

100

Figure 3: Accountability versus literacy

Accountability literacy

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The significant associations found in table 3 can all be graphed visually. But since the results are not substantially different from table 3 and the four graphs above, it suffices to derive conclusions from table 3 and the four graphs. The analysis in this sections proves that accountability and corruption are associated with several poverty measures, and they have correct significant signs of associations. Accountable and corruption-free governments stand a better chance to reduce under-five mortality, income poverty, and number of slum dwellers and increase adult literacy, access to clean water and electricity. This fight against poverty requires resources as a necessary condition and a discipline in terms of good governance as a sufficient condition. In figure 5, we present the visualized relationship between World Bank accountability index and the corruption index of the Transparency International. They are found to be significantly correlated at 87.21%. Thus, the relationships found between accountability and poverty indicators can be generalized to present the relationships between corruption and the poverty indicators to avoid repetitions.

Empirical Analysis The paper argues that real per capita GDP growth is a necessary condition for poverty reduction but not sufficient. The sufficient condition is the good governance. That is, no matter what economic growth is recorded in an economy, if it is not accountable, participatory and free from corruption, poverty will not be reduced.

0

20

40

60

80

100

Figure 4: Accountability versus slum dweller

Accountability Slum dweller

010203040506070

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Figure 5: Accountability and corruption

Accountability corruption -IP

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The model is specified using cross- sectional data for the year 2014.

ititititit ACVYfP ,,,

P = poverty index (to be alternated among income poverty, inequality poverty, sanitation poverty, water poverty, health poverty, education poverty, living condition poverty and energy poverty as data may permit) Y = real per capita GDP, which is treated here as a control variable V= voter turnout as a percentage of voting age population C = corruption perception index A = accountability index This relationship can specified as

itititititit uVCAYP 4321

Assuming the error term u is normally independently and identically distributed, and the explanatory variables are random and weakly exogenous, we can estimate the parameters of the regression and conduct inferential tests. From the correlation matrix in table 3, we identify that the participation variable is irrelevant for the poverty indicators, and it can be consequently dropped from the model. The accountability variable and the corruption variable are found to be highly and significantly correlated at 87.21%. Including both explanatory variables in the model can result in a multicollinearity problem. To correct for the irrelevance of participation variable and multicollinearity problem, the above model is reduced to as

itititit eAYP 21

The estimation results of the reduced model are presented in table 4 Table 4: Regression results of Poverty and Governance Dependent Variable Explanatory Variable

Under-5 mortality

MPI Income poverty $1.9

Inequality

Slum dweller

Access to Clean water

Access to Electricity

Access to Sanitation

literacy

Per capita GDP

coefficient

-.002911**

-.0072

1*

-.00633

*

-.00035

3

-.0046

6**

.000797***

.0027218**

.002977*

.001632**

Standard error

.0011002 .0015656

.0018089 .0006943

.0019064 .0004132 .0010569 .0010219 .0007979

P-value

0.011 0.000 0.001 0.615 0.020 0.061 0.013 0.006 0.048

Accountability

coefficient

-.744352**

.0048053

-.23337

4

.0432583

-.5832

7**

.372765*

.291353

.2797368

.2884012

Standard error

.3429003 .1941543

.3049283 .0977838

.2757153 .1328716 .3220068

.3183107 .2535197

P-value

0.036 0.980 0.450 0.662 0.043 0.008 0.370 0.385 0.263

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constant coefficient

86.3518*

33.8315*

50.25675*

36.93865*

69.4408*

69.25965*

52.24662*

42.64029*

57.9448*

Standard error

9.687504

5.072393

8.124749

2.522202

7.091963

3.862183

9.083508

9.138456

7.16939

P-value

0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000

R-squared

0.3606

0.4269

0.4628 0.0101 0.3974

0.3733 0.2279 0.2740 38

F-statistic 12.13 (0.000

1)

13.04 (0.000

1 )

12.92 (0.000

1 )

0.14 (0.867

4)

10.22 (0.000

4 )

11.91 (0.000

1 )

6.49 (0.003

4 )

7.92 (0.001

2 )

5.58 (0.007

9 )

Observations

46 38 33 31 34 43 47 45 38

* = significant at 1%, **= significant at 5%, and ***= significant at 10%

As expected apart from inequality variable, per capita GDP is found to be a significant determinant for all poverty variables. Per capita GDP growth can significantly reduce under-five mortality, reduce poverty in its multidimensional aspects, reduce income poverty, reduce the number of urban population living in slums, increase access to clean water, plumbed sanitation, access to electricity and increase adult literacy. Expansion of per capita GDP is a necessary condition for the fight against poverty. Governance is not found to be relevant for all poverty dimensions. But, it is relevant for the under-five mortality, number of slum dwellers and access to clean water. As the degree of accountability increases, the incidence of under-five mortality drops, number of urban people living in the slums dwindles, and the access of the population to the clean water increases. Is there 400% governance dividend in the data as found by Kaufman (2000), which states that improvements in governance result in four fold drop in under-five mortality? Using the coefficients in table 4, we calculate the average elasticities to answer this question. Table 5: Average elasticity between poverty indicators and the explanatory variables Variable Under-5

mortality

MPI Income poverty $1.9

Inequality

Slum dweller

Access to Clean water

Access to Electricity

Access to Sanitation

literacy

Per capita GDP

-0.165** -0.552*

-0.416* -0.018 -0.172**

0.031**

*

0.126** 0.159** 0.077**

Accountability

-0.384** 0.006 -0.228 0.033 -0.331**

0.134* 0.119 0.134 0.115

* = significant at 1%, **= significant at 5%, and ***= significant at 10%

There is no 400% governance dividend in the data. But, governance does impact significantly on some poverty variables. Ceteris paribus, 1 per cent increase in

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accountability can lead to 0.38% drop in under-five mortality, 0.331% drop in the number of slum dwellers, and 0.13% increase in population access to clean water. The magnitude of responsiveness of under-five mortality to a change in accountability is larger than its responsiveness to a change in per capita GDP. Similarly, number of slum dwellers and the population access to clean water respond in a greater magnitudes to a change in accountability than to a change in per capita GDP. This implies that small changes in governance can lead to substantial improvements in poverty variables; and thus governments should make efforts to adopt good governance and be able to attain both necessary and sufficient conditions to win the fight against poverty. Contrary to the findings of Narayan (1995) and Sham et al. (1995), the participation variable is found in this paper to be irrelevant in explaining variations in poverty variables. The reason for the different results could be due to the definition of the participation. In their studies, the participation variable is at micro-level context, while it is here defined at a macro-level context. That is participation of the beneficiaries in the decision making of the projects at community levels is very vital and it contributes to poverty reduction of the beneficiaries. But, participation in elections to choose representatives in the decision making of the projects at national levels is found to bear no impact on the poverty reduction. Conclusions and policy implications Good governance is a key component of the sustainable development goals. IDB member countries are doing well enough on good governance, as the performance of majority of them on accountability and corruption is below the world average. Several development institutions have included good governance in their agenda. It is part of IDB’s 1440 mission, and it should activate it in when financing the fight against poverty. Many countries derailed off their targets of poverty reductions not only because they did not have the financial resources, but also because they did not perform well enough on good governance. It is found in this paper that corruption eats away the vital resources that supposed to go into the fight against poverty. Corrupt countries see their infant mortality increase, income poverty spreads and sticks, increasing number of urban population become slum dwellers; and water, electricity and education become reserved for the lucky few. When countries free voices to hold the representatives accountable, implement regulation and rule of law equitably, and maintain efficiency and effectiveness and stability, then the limited economic resources will be used correctly to fight poverty. Accountable and corruption-free governments are found to reduce poverty better than the unaccountable and corrupt governments. The fight against poverty needs two vital conditions as the findings here indicate. They are expansion of per capita GDP as a necessary condition, and good governance for the administration of the economic resources as sufficient condition. Good governance is found to be particularly relevant for the reduction of under-five mortality, improvement of living conditions (reduction of urban slum dwellers) and increased access to clean water. This implies that development institutions and agencies should set governance targets when providing financial resources in the fight against poverty. This fight is won and sustained not only with provisions of financial resources but also with attainment of good governance in terms of accountability and transparency. References

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