Macroeconomic Policies and Social Inclusion in the Developing World


  • Zakia Batool International Institute of Islamic Economics, International Islamic University, Islamabad, Pakistan. | Department of Economics, National University of Modern Languages, Islamabad, Pakistan.
  • Arshad Ali Bhatti International Institute of Islamic Economics, International Islamic University, Islamabad, Pakistan.



Monetary Policy, Fiscal Policy, Social Inclusion, Panel data, Government Spending, Tax Revenue, Institutional Quality, PCA


Many in the developing world face social exclusion and discrimination, preventing them from actively participating in society itself. Sound macroeconomic policies with a focus on stabilizing the price level and social outcomes can help to achieve social justice for marginalized people. This study empirically examines the impact of macroeconomic policies on social inclusion, considering specifically the coordination among them in promoting that social inclusion. It deals primarily with pure non-income dimensions of social inclusion such as education, and health, etc. Using annual panel data of 51 developing countries for the period 1995-2017 this study employs state-of-the-art panel data estimation methods – pooled estimation, fixed-effect, and random-effect models. To check for robustness and to handle the problem of endogeneity, the 2SLS technique has also been used. This study argues that a well-designed macroeconomic policy framework can do much more than just achieve economic goals. Results suggest that fiscal and monetary policy, through resource mobilization, can play a significant and positive role in promoting social inclusion. However, these fiscal and monetary policy actions are not independent; thus, a policy mix is required to achieve the target of an inclusive society.


Metrics Loading ...


Afonso, A., Alves, J., & Balhote, R. (2019). Interactions between monetary and fiscal policies. Journal of Applied Economics, 22(1), 132-151.

Akram, M., & Khan, F. J. (2007). Health care services and government spending in Pakistan (No. 2007: 32). Pakistan Institute of Development Economics.

Aslam, A., Naveed, A., & Shabbir, G. (2020). Is it an institution, digital or social inclusion that matters for inclusive growth? A panel data analysis. Quality & Quantity, 1-23.

Atkinson, A. B. (1998). Chapter one: social exclusion, poverty, and unemployment. Centre for Analysis of Social Exclusion, CASE Paper, (4).

Avramov, D. (2003). People, demography, and social exclusion: Population Studies, No. 37. Council of Europe.

Balakrishnan, R., Elson, D., Heintz, J., & Lusiani, N. (2011). Maximum available resources and human rights. Centre for women’s global leadership, Rutgers. The State University of New Jersey.

Carter, B. (2015). Benefits to society of an inclusive societies approach. GSDRC Helpdesk Research Report 1232. GSDRC, University of Birmingham.

Ceano-Vivas, M.S., Rivera-Lirio, J. M., & Munoz-Torres, M. (2014, November 10). The role of fiscal policy in the achievement of social cohesion. Tax Mix and Public Social Spending.

Crotti, R., Geiger, T., Ratcheva, V. & Zahidi, S. (2020). The global gender gap report 2020. World Economic Forum.

De-la-Brière, B., & Rawlings, L. B. (2006). Examining conditional cash transfer programs: a role for increased social inclusion? No. 90341. The World Bank.

Di Cataldo, M., & Rodriguez-Pose, A. (2017). What drives employment growth and social inclusion in the regions of the European Union? Regional Studies, 51(12), 1840-1859.

Dollar, D., & Kraay, A. (2002). Growth is good for the poor. Journal of Economic Growth, 7(3), 195-225.

Drucza, K. (2016). Cash transfers in Nepal: do they contribute to social inclusion?. Oxford Development Studies, 44(1), 49-69.

European Commission (2004). Public finance in EMU. Brussels.

Felder, F. (2018). The value of inclusion. Journal of Philosophy of Education, 52(1), 54-70.

Gradstein, M., & Justman, M. (2002). Education, social cohesion, and economic growth. American Economic Review, 92(4), 1192-1204.

Grown, C., & Valodia, I. (Eds.). (2010). Taxation and gender equity: a comparative analysis of direct and indirect taxes in developing and developed countries, Vol. 58, IDRC.

Gygli, S., Haelg, F., Potrafke, N., & Sturm, J.-E. (2019). The KOF globalisation index–revisited. The Review of International Organizations, 14(3), 543-574.

Ihsan, I., & Anjum, S. (2013). Impact of money supply (M2) on GDP of Pakistan. Global Journal of Management and Business Research, 13(6).

Islam, M. Q. (2000). Fiscal policy and social welfare in selected MENA countries. In: Shahin, W. & Dibeh, G. (Eds.) Earnings Inequality, Unemployment, and Poverty in the Middle East and North Africa. Greenwood.

Jollands, N. (2003). The usefulness of aggregate indicators in policy making and evaluation: a discussion with application to eco-efficiency indicators in New Zealand. Inaugural EEN (Economics and Environment Network) National Workshop, 1-3 May 2003, Canberra, ACT.

Kaiser, H. F. (1960). The application of electronic computers to factor analysis. Educational and Psychological Measurement, 20(1), 141-151.

Klasen, S. (2010). Measuring and monitoring inclusive growth: multiple definitions, open questions, and some constructive proposals. ADB Sustainable Development working paper series No. 12, Asian Development Bank.

Lin, J. Y., Monga, C., & Standaert, S. (2019). The inclusive sustainable transformation index. Social Indicators Research, 143(1), 47-80.

Mooi, E., Sarstedt, M. and Mooi-Reci, I. (2018). Market research: The process, data, and methods using Stata. Heidelberg: Springer.

Nardo, M., Saisana, M., Saltelli, A., & Tarantola, S. (2005). Tools for composite indicators building. European Comission, Ispra, 15(1), 19-20.

O’Brien, M., & Penna, S. (2008). Social exclusion in Europe: Some conceptual issues. International Journal of Social Welfare, 17(1), 84-92.

Oxoby, R. (2009). Understanding social inclusion, social cohesion, and social capital. International Journal of Social Economics, 36(12), 1133-1152.

Owolabi, S., & Okwu, A. T. (2011). Empirical evaluation of contribution of value added tax to development of Lagos State economy. Middle Eastern Finance and Economics, 1(9), 24-34.

Paternostro, S., Rajaram, A., & Tiongson, E. R. (2007). How does the composition of public spending matter? Oxford Development Studies, 35(1), 47-82.

Pogue, T. F., & Sgontz, L. G. (1977). Social security and investment in human capital. National Tax Journal, 157-169.

Ravenna, F., & Walsh, C. (2010). The welfare consequences of monetary policy and the role of the labour market: A tax interpretation, No. 10-01. HEC Montreal, Institut d’economie appliquee.

Rawal, N. (2008). Social inclusion and exclusion: a review. Dhaulagiri Journal of Sociology and Anthropology, 2, 161-180.

Salzman, J. (2003). Methodological choices encountered in the construction of composite indices of economic and social well-being. Technical Report, Center for the Study of Living Standards, Ottawa.

Tangcharoensathien, V., Mills, A., Das, M. B., Patcharanarumol, W., Buntan, M., & Johns, J. (2018). Addressing the health of vulnerable populations: social inclusion and universal health coverage. Journal of Global Health, 8(2).

UNESCO (2012). What role for UNESCO in 2014-2021? Consultations of the DG with Member States: Social Inclusion, Social Transformations, Social Innovation.

Wan, G., & Zhuang, J. (2015). Making growth more inclusive. In Managing the middle-income transition. Edward Elgar.

Wang, C., & Naveed, A. (2019). The social inclusion and inequality nexus: EU versus non?EU migrants. International Migration, 57(3), 41-62.

World Bank. (2006). Equity and development: world development report 2006. World Bank.

World Bank. (2011). Gender equality and development: world development report 2012. World Bank.

World Bank. (2013). Inclusion matters: the foundation of shared prosperity. World Bank.

Worlu, C. N., & Nkoro, E. (2012). Tax revenue and economic development in Nigeria: a macro econometric approach. Academic Journal of Interdisciplinary Studies, 1(2), 211-211.



How to Cite

Batool, Z., & Bhatti, A. A. (2020). Macroeconomic Policies and Social Inclusion in the Developing World. Liberal Arts and Social Sciences International Journal (LASSIJ), 4(2), 114–129.