Effect of income distribution on poverty reduction after the Millennium

This study aims to investigate the effect of income distribution on poverty reduction and the effect of income distribution on growth elasticity of poverty reduction. It uses panel data of 70 countries during 2001-2010 provided by the World Bank. It applies panel data analysis both fixed effect and random effect models. It selects a better model by Hausman test. The findings reveal that, in general, better income distribution cannot reduce poverty in the world after the Millennium. Only in Southeast Asia that income distribution is significantly effective for the poverty alleviation. Moreover, better income distribution does not significantly affect the speed of poverty reduction which is measured by the growth elasticity of poverty reduction. The results of the study suggest that it is still hopeful for governments only in Southeast Asia that poverty can be reduced by better income distribution. Therefore, they should launch the policy that promotes the equality of income distribution especially job creations and income generation in rural communities of the countries to create the ultimate impacts on poverty reduction.