Social spending and multidimensional Poverty in Ecuador

Abstract

One of the main policy instruments to fight poverty, especially in developing countries, is the public spending in sectors as education, health, and social welfare. In Ecuador, the amount of these three sectors has experienced a growing trend from 2008. Consequently, our objective is to identify the effect of public spending on multidimensional poverty in Ecuador, therefore, a multidimensional poverty index based in fuzzy sets theory is applied, analyzing it as a degree of deprivation rather than an attribute of presence or absence, we construct a poverty profile and estimate a multinomial probit model with a pool of provincial data for the period 2009–2017. Our main results show that poverty is reduced in the study period, but that not all population groups have benefited to the same extent, in addition that social welfare spending has significant effects on multidimensional poverty, but health and education spending are not significant. These results suggest that public policies should be applied in two ways, one to combat poverty and the other to close the gaps, which leads to the execution of more and better public spending on social welfare.