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Chapter 2

REVIEW OF RELATED LITERATURE AND STUDIES

This chapter presents an extensive review of literature and studies related to the present

investigation.

Economic growth is a crucial factor in poverty reduction; however, other factors such as

inequality affect its impact on poverty. Consistent failure to reduce poverty and inequality may

also result in a lower economic growth trajectory (Lustig et. Al 2001). There is theoretical and

empirical evidence proving that the cause and effect runs in the opposite direction as well (i.e.,

reducing poverty can help boost economic growth rates). For example, Latin America’s

persistent poverty has been impeding the achievement of higher growth rates and there are

reinforcing vicious circles that keep families, regions, and countries poor and unable to

contribute to national growth (Perry et al. 2006). On the reverse side, there is a possibility of

entering a virtuous circle where growth lowers poverty, which in turn results in faster growth.

Human capital

In the recent literature, the new concept of task-specific human capital was coined in

2004 by Robert Gibbon, an economist at MIT, and Michael Waldam, an economist at Cornell.

The concept emphasizes that in many cases, human capital is accumulated specific to the nature

of the task and the human capital accumulated for the task are valuable to many firms requiring

transferable skills.

Health

With ageing populations, health has a profound but ambiguous impact on labour market

activity and its outcomes. While generous social security systems encourage early retirement,

policy makers have begun to offset this trend and address longevity by extending the age of

retirement. Health is measured, standard in the literature, by a health index (HI) for each

individual and their spouse by regressing a five-point categorical self-assessed health (SAH)

variable on measures of diagnosed health conditions, such as Asthma, Diabetes or Cancer, a

number of activities potentially limited by the current health status of the respondent and a broad

range of socio-economic characteristics using standard ordered profit.

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According to Cesar Chelala (2016) people with low income are at greater risk of illness and

disability. They are also less informed about the benefits of healthy lifestyles, and have less

access to quality health care. It is estimated that one third of deaths worldwide –some 18 million

people a year or 50,000 a day- are due to poverty-related causes. Those who live in extreme

poverty are five times more likely to die before age five, and two and a half time times more

likely to die between 15 and 59 than those in higher income groups. The same dramatic

differences can be found with respect to maternal mortality levels and the incidence of

preventable diseases. The impact of poverty on health is largely mediated by nutrition and is

expressed throughout the life span. Those living in poverty and suffering from malnutrition have

an increased propensity to a host of diseases and an increased exposure and vulnerability to

environmental risks.

Education

Most families living in conditions of extreme poverty cannot afford to send one or all of

their children to school. Moreover, in many countries, even primary education must be paid,

and secondary education is free and compulsory only in developed countries and in some less

developed countries.

Development of human capital emerges as a particularly strong factor behind the growth

of exports. Capital investment also as expected turns out to be a very strong factor for the growth

of exports in manufacturing. This makes sense, as industrialization is strongly to the

development of physical capital especially in developing countries. The standard of living is also

a strong factor behind structural change as predicted in the model. Higher per capital income is

usually an indicator of better socio-economic structures that increase the efficiency in the

economy, and augment the process of industrialization.

Physical Capital

Sense of place is shaped by the local physical capital: its roads, buildings (houses,

businesses, warehouses). In the context of community development, physical capital refers to the

stock of buildings and infrastructure on a locality. When individuals or households make an

investment in physical capital, they expect a return on that investment, whether it is going to be

sold later for profit or heirs will inherit it. This investment, however, also provides a return to
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other community residents as well. Community benefits are limited to profit but also include

improvement in resident satisfaction and ability to meet basic needs.

Water

One of the most important natural resources that is necessary for the rise and

development of any biological and human activity.

Experts in the field agree that the quantity of water is even more important than the

quality in terms of its impact on human health. However, water scarcity leads to declining water

quality and pollution, which has an especially adverse impact on the poor. Many (perhaps most)

of the poorest people in developing countries are forced to drink water that is unfit for human

consumption. They suffer from a range of skin and internal diseases and health problems. As

water is withdrawn from agriculture, more attention must be given in the management of

irrigation systems to water needs for domestic and health purposes, and to other consequences

such as the impact on the environment. Unfortunately, in the case of water for agriculture,

allocation cannot be accomplished solely through pricing mechanisms. Along with farmers,

other stakeholders including the poor should have a voice in how limited water supplies are to be

allocated.

Housing

Is a case to be made for the centrality of housing because of the greatest resistance of its

acceptance as a contemporary threat—in both the security and development discourses.

According to Rebecca Tunstall et al. (2013) evidence that poverty affects housing

circumstances is generally stronger than evidence that housing circumstances affect poverty.

Low incomes prevent access to many potential housing options, or make them hard to sustain.

There is substantial evidence to show that poor housing conditions affect some aspects of child

development or elements of adult health.

Infrastructure

An adequate supply of infrastructure services has long been considered essential for

economic development by both academics and policymakers. Industrialization and the export of

manufactured goods are critically dependent on infrastructure. Without efficient and proper
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systems that support movement of inputs and output, energy to run factories as well as shipping

and communication networks that support trade and create markets, no country can industrialize

or effectively participate in trade.

An extensive literature confirms that returns from investment in both human and physical

capital are significant while other strands of literature find a spillover effect of investments in

human and physical capital. Breton shows that education affects economic growth directly and

indirectly; in later case, it increases growth by increasing the productivity of physical capital.

Poverty is a huge case in the Philippines since proportion of the population’s income is

less than the poverty line, which is the minimum income required meeting basic needs and other

requirements such as housing, health, and education expenses. Through various anti-poverty

programs such as the Comprehensive Agrarian Reform, Lingap Para sa Mahirap, and the Social

Reform Agenda, the Philippines has been through a long battle to ameliorate the statistic of

poverty. Despite the governmental efforts, the Millennium Development Goal milestone of

reduction in poverty has been a slow process. Eliminating poverty has always been a major

challenge in the Philippines and still they continue to struggle. Filipinos are having a hard time

surviving in such difficult conditions, and more and more are falling into extreme poverty.

Needless to say, the country continues to face a daunting poverty challenge. We can see many

individuals wandering around the streets, begging for food and money just for them to be able to

get by.

The effects of poverty are harmful to both of the individuals and the society. The human

and physical capital assets help in determining certain people who are in line with poverty. These

capital assets are the basis of how low-income households get affected by lack of needs, health,

education, stability and sustainability. The researchers limited their study in Cawa-cawa, Dapitan

City. They focused on these capital assets in relation to education, health, water, housing, and

infrastructure, on how the low-income households would access to these variables. They aim to

put forward a concrete framework, which seeks to illuminate the determinants of poverty and to

clarify the cause of its dynamics among low-income households.