Public instruments for poverty reduction: The case of OECD countries

Fiscal policy instruments such as public expenditures and public revenues are at the forefront of the governments' tools in poverty reduction. Considering these, this study aims to examine the effect of public tools on poverty. The study covers the data set of the 24 OECD countries between 2004 and 2017. The panel data analysis is used as a method in the study, and all models were estimated with a fixed-effects model. The factors affecting poverty were economic growth, GINI, per capita income, inflation, and unemployment. Public expenditures, public revenues, and public deb are used as public instruments variables. The results showed a relationship between public instruments and the poverty rate. In other words, the poverty rate is negatively relationship with public consumption, health expenditures, social expenditures, corporate tax, and excise tax. On the contrary to this finding, there is a positive relationship between public debt and poverty rate. The negative effect of public expenditures on the poverty rate is more effective than public revenues. The increases in public debt burden also increases the poverty rate. To sum up, there is a close relationship between the poverty rate and public instruments. An improvement can be achieved on the problem of poverty by emphasize on the use of effective public instruments in the policies of poverty reduction.