Public Policy for Growth and Poverty Reduction

In this paper, I would like to outline an approach to public policy that focused on fighting poverty and is based on an understanding of growth and development. Such a public policy requires answering two key questions. First, what are key determinants of a development that benefits poor people – or what has been labelled "pro-poor growth"? And second, we need to answer the policy question: how can public action influence the key determinants we identify? In putting the questions this way, we are setting ourselves the task of building a dynamic public economics – a public economics of development. Given that development is the objective, this task will require a better understanding of how to measure it. And we must also achieve a better grasp of changes of behaviour in the process of development, since changing perspectives and behaviour are usually an integral part of the development story. In laying our task of advancing a dynamic public economics, however, let me emphasise that should be building – on – not overturning – past theory. In much of the work I will describe, the empirics seem to be ahead of theory. Thus one of my purposes is to highlight some elements of an agenda for theoretical research. (JEL E6)