Re-examining the Poverty-Growth-Inequality Triangle in ASEAN-5 Countries

Abstract

This study re-examines the Poverty-Growth-Inequality (PGI) triangle within the ASEAN-5 countries comprising Malaysia, Indonesia, the Philippines, Thailand, and Vietnam to determine if economic growth naturally benefits the poor or if structural inequality creates structural barriers to inclusive development. Utilising a balanced panel dataset spanning 1990–2024, the research employs second-generation econometric techniques, including the Pesaran (2004) cross-sectional dependence test, Pesaran (2007) Cross-sectional Augmented IPS (CIPS) unit root tests, Pedroni (1999) panel cointegration, and Dumitrescu and Hurlin (2012) panel Granger non-causality tests. The CIPS test confirms that all variables are integrated of order one, I (1), satisfying the prerequisite for cointegration analysis. The Pedroni cointegration test provides robust evidence of a significant long-run equilibrium relationship among poverty, growth, and inequality across all specifications. Notably, the results reveal strong bidirectional short-run Granger causality between economic growth and poverty, confirming a mutual reinforcement between the two variables. Additionally, a strong bidirectional causality between growth and inequality and a unidirectional link from poverty to inequality are established. These results provide original evidence that Bourguignon’s (2003) framework remains relevant but complex in the ASEAN context, implying that growth alone is insufficient for poverty reduction. Consequently, policymakers must move beyond ‘trickle-down’ assumptions to implement integrated strategies, such as labour market reforms, progressive fiscal policies, and targeted social protection, to dismantle structural barriers and achieve the United Nations Sustainable Development Goals.