Why Do Some HIPCs Achieve Better Poverty Reduction Than Others?

• In Event: Development and Human Rights

Abstract

The impact of debt relief on poverty reduction has been widely debated in the debt relief and economic growth literature. Scholars such as Arlsanalp and Henry (2006), Easterly (2002), and Presbitero (2009) argue that strong institutions make debt relief more effective while Thomas (2001) and Hall et al (2018) suggest that domestic ownership in the Poverty Reduction Strategy Paper process produces better outcomes on poverty. However, these works have not adequately explained why some Heavily Indebted Poor Countries (HIPCs) are better able to reduce poverty than others after receiving debt relief. My paper fills this gap in the literature by focusing on Central and Latin American HIPCs and their differences in poverty reduction after completing the HIPC Initiative. I compare the institutions and domestic ownership hypotheses existing in the literature as well as an original hypothesis based on domestic politics and labor interest groups. Ultimately, my detailed case study comparing Nicaragua, Honduras, Bolivia, and Guyana reveals that the institutions hypothesis best explains why some HIPCs are more successful than others in reducing poverty. Given my findings, I argue that debt relief should be conditional on institutional improvement. In conclusion, this case study closely examines the differences between HIPCs in Central and Latin America and sheds new light on the understudied topic of variation between HIPC’s debt relief outcomes.

Author

• Ashley Simpson, The University of Texas at Dallas