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This study uses large cross-country samples and several measures of happiness, income, and government spending to revisit the relation between government spending and the population's happiness. The main finding is that increased government spending does not lower happiness in broad cross-country contexts. Much caution is, therefore, urged in interpreting the negative association between government spending and happiness reported in some earlier studies and the suggested policy implications. Three additional points are noted. First, the weight of the evidence suggests a significant positive association between income and happiness. Second, estimates based on income and government-share data from Penn World Table and the new International Comparison Program show similar patterns. Third, the parameter for generalized trust seems fragile. Adapted from the source document.

AbstractThis paper uses a reasonable model and recent cross‐country data to study empirically the effects of income and equality on poverty. Three main points are noted. First, the estimates show highly significant roles of income and equality in poverty reduction, and the effects of increased income and lower inequality are both substantial. Second, the elasticity of poverty with respect to inequality is substantially larger than that relative to income. Third, the estimates suggest a 'growth elasticity' of poverty that is much smaller than the values used in almost every study. Therefore, most of the well‐known and influential recent research seems to have overstated the impact of income growth on poverty alleviation by de‐emphasising the role of inequality, to which poverty is highly responsive, and by using an income (growth) elasticity of poverty that is much larger than what seems reasonable. Copyright © 2007 John Wiley & Sons, Ltd.

SUMMARYEstimates of the elasticity of headcount poverty with respect to income suggested in many influential studies appear too high and imply a more important role for income‐growth in poverty‐reduction than is appropriate. Direct estimates based on aggregate data for several different periods are much smaller at about −1, which (in absolute terms) is no larger than one‐half of those suggested in the literature. Researchers and policymakers are urged to use the lower estimate for any real‐world application in a global or cross‐country context. In such contexts, when per capita income increases by X percent during any period, decline in headcount poverty during the period should be expected to be of the order of X percent, and not, as most influential studies suggest, 2X percent.

Trends in commodity terms-of-trade since 1970 are estimated for a sizable sample of countries. The predominant pattern for developing countries is that of negative trends, but there is some improvement since 1980, and an increase in the share of manufactures in exports appears helpful. The estimates seem generally supportive of the spirit of Prebisch-Singer hypothesis. Establishment of an international organization to generate and disseminate technology for developing countries might mitigate their disadvantage in international exchange.

AbstractThis note adds to the research which questions the recent influential view that recipient country's 'policies' play an important role in the effect of foreign aid on economic growth in developing countries. In the first step, the almost universal practice of imposing the constraint of equality on parameters of bilateral and multilateral aid is relaxed and it is shown that 'policy' has no role in the effect of aid even in those cases where the usual constrained models do show such an effect. In addition, many cases are noted where there is no indication of recipient country's policies having any role in the effect of aid on growth even in the usual constrained specifications. These cases employ not merely the Burnside–Dollar 'policy' index, which almost all scholars have used, but also two other broader measures. It is thus concluded that there is little empirical evidence to support the widely‐disseminated view that redirecting aid toward countries with 'good' policies leads to more growth and greater poverty reduction in developing countries. Copyright © 2004 John Wiley & Sons, Ltd.