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MDG number 1 in Namibia: How to reduce poverty by half by 2015.

The reduction of extreme poverty by half is the first Millenium Development Goal (MDG1). However, it is not clear how to realise this goal. Sachs (The End of Poverty, 2005) recommends to first identify the target and then determine how much foreign aid is needed to realise the target. But William Easterly (The White Man’s Burden, 2006) gives an overview of the international literature on the effectiveness of foreign aid and concludes that foreign aid does not eliminate extreme poverty.

So how CAN we fight poverty?
To contribute to the answer to this question we use a combined macro and micro economic framework. We made many exercises (variant analysis) using the macroeconomic model of Namibia (Macroabc NA) that includes a poverty module.

The results of the exercises are given in a non-technical summary and in a technical paper.

Our conclusion is that a reduction by half of the number of households below the poverty line in Namibia can only be achieved by implementing a package of measures consisting of an increase in exports, an increase in the area productivity in the self-subsistence sector and introduction of a basic income grant. The target cannot be achieved by only implementing one of these measures.

But how can we increase exports? And the area productivity in the self-subsistence sector?

The answer to these questions cannot be given only by macroeconomists, but by macroeconomists in cooperation with sector specialists. The government can contribute to export growth and higher competitiveness by lowering taxes and by giving priority to those government activities that increase labour productivity, but within the constraint that the government deficit does not go up. Furthermore investment policy might help, like promotion of the tourism sector, the energy sector, and others.

The exercises and the results are discussed in the paper “MDG1 in Namibia: How to reduce poverty by half by 2015?”. The paper, the non-technical summary and the macromodel Macroabc-NA can be downloaded here: