The macroeconomics of poverty reduction in Cambodia

Type Book
Title The macroeconomics of poverty reduction in Cambodia
Author(s)
Publication (Day/Month/Year) 2004
Publisher Asia-Pacific Regional Programme on the Macroeconomics of Poverty Reduction, UNDP
URL http://www.ipc-undp.org/publications/reports/Cambodia.pdf
Abstract
This study focuses on how macroeconomic policy tools have impacted poverty. The set of
macroeconomic issues that are the focus of this study are; monetary policy, fiscal policy, trade
liberalization, financial liberalization and privatization. Most poverty alleviation theory and
practice focuses on micro-level and sectoral interventions without regard to the ways in which
the macroeconomy influences the outcomes of such interventions. Since much economic
theory teaches that the macroeconomy is no more than an aggregation of its microcomponents,
this approach is hardly surprising. However, the numerous interdependencies
between individual economic agents make simple aggregation impossible and this means that
micro-level actions can have outcomes which are quite different from those intended. This
study therefore approaches the subject from a different viewpoint - that in which the whole is
not the sum of its parts. We start from the premise that macroeconomic policy settings, even if
they produce respectable economic growth and stability, often have distributional impacts that
can constrain the best efforts of individuals to climb out of poverty. As we shall show, there is
evidence that this has happened during the last decade in Cambodia.
Some elements of the study which were not part of our direct concern need to be mentioned
here as they provide important context to the study. First, we note that poverty itself
encompasses a much wider concept of deprivation than the purely material. However in this
study the main focus is on how macroeconomic policies can affect income poverty. The most
direct route, in the absence of a social safety net, is through increasing sustainable
employment opportunities. The labour market is thus the main link between macroeconomic
policy and poverty reduction. Wider dimensions of deprivation that are often incorporated in a
capabilities approach to poverty (Sen 1999) are addressed through the supply constraints that
inhibit agents at the microeconomic level. Although the final objective focuses on alleviating
income poverty, the study also addresses non-monetary constraints that inhibit agents from
participating in a economic and social development and thus indirectly incorporates a wider
concept of deprivation.

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