Journal of Economics, Management and Trade

This research is an attempt to explore; does the overall education and health situation of a country have a considerable impact on poverty magnitude? It also tries to find out the level of efficiency of selected countries to utilise education and health expenditures. This study uses data of 40 developing countries for the period of 1999-2007 and Data Envelopment Analysis (DEA) for empirical estimation. The study concludes three key findings. First, in contrast to trickle-down theory, achieving decent or high income growth rates do not ensure poverty reduction at similar pace. Second, improvements in educational and health outcomes are strongly and negatively associated with poverty incidence. However, educational improvements appear to be more strongly correlated with decline in poverty headcounts as compared to health improvements. Third, efficient use of public expenditures on education and health not only results in improved educational and health outcomes but it also permits a reduction in poverty. Thus, the study provides evidence in support of poverty reduction through improved education and health status.