Figure 1 Poverty Incidence (%) in Gabon, 2005-2017Source: World Bank Estimates.
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CHAPTER TWO: LITTERATURE REVIEW
2.1. Economic Growth
The key finding from the last half of the century of study and policy development is thateconomic growth is the most efficient way to lift a country out of poverty and achieve itsbroader aspirations for a better life. Adams’s findings [10], from cross-country studies showthat a 10% increase in a country’s income will reduce the poverty rate by between 20 and30%. Furthermore, Fosu[11],, in his study from 2015 focusing on Sub-Saharan countries,concluded that economic growth played an essential part in reducing poverty, and thatincome inequality also has a direct relationship with poverty. On the other hand, Majid [12],suggested in 2003 that while both national income and inequality affect poverty as explainedthus far, the role of national income in tackling poverty is decreasing, and inequality isgrowing over the development cycle. Changes in GDP have caused changes in poverty upuntil now, but increases in inequality can only impact poverty in middle-income countries bycontrast. Based on new data sets created for the study of the impact of economic growth onpoverty, there does not appear to be a clear relationship between these two. While it remainsa positive relationship, the study suggests that economic growth aids developing countries.Fields [13], conducted in 2000, a study on African economic growth and the dynamics ofpoverty,inequality, and economic well being. The author stated that new patterns of growth areneeded to adapt well in the new century and in order to prevent more inequalities in theworld economy.
Furthermore, the author also deducted that there are no cases in which the effect ofgrowth is offset by inequality. Thus, economic growth is indeed a factor that reduces poverty.Moreover, Braithwaite and Mont[14],, in a study of developing countries such asMozambique, found in 2009 that swift growth happening in a short period of time wasassociated with poverty reduction From 1996 to 2002, the economy increased by 62% andthe poverty ratio declined from 69% to 54%. Other economists suggest that economicgrowth does not reduce poverty. Jackson [15], found in 2017 that economic growth is a mythand questionable as an impact on eradicating growth. Growth alone does not appear to be asufficient situation to decrease poverty. Iniguez-Montiel[16], in his paper published in 2011discussed the role of growth, income inequality, and poverty in the case of Mexico duringthe period of 1992–2008. The findings indicate that during the period of 2000–2006,economic growth was highly valuable when considering poverty reduction. However, after2006, he noticed the trend reversing. With high inequality and decreasing per-capita income,the poverty rate rose to pre-2002 levels.
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2.2 The link between economic growth and the poverty reduction
The scientific literature over the past decades establishes the link between the financialgrowth of countries and their poverty reduction strategies
Quartey[36]examined the link between financial sector development and povertyreduction in Ghana. Jeanneney and Kpodar (2008) [37] looked at how financial sustainability,both directly through the McKinnon [38] conduit effect and indirectly through economicgrowth, would help to reduce poverty. Jiang and Yan (2006)[39]investigated theeffectiveness of civilian credit in anti-poverty frameworks in China’s rural area. The
