Growth Strategies and Poverty Reduction

Recent evidence confirms the existence of a positive growth-poverty nexus—sustained growth almost invariably leads to sustained reduction of poverty. The mere existence of this nexus, however, does not suggest what kind of growth strategy is best suited for poverty reduction. This paper shows that there can exist important trade-offs between growth and poverty reduction so that the policies that maximize the rate of growth need not always maximize the rate of poverty reduction. Evaluation of alternative growth strategies shows that the so-called win-win policies that maximize growth and poverty reduction at the same time are not plentiful. However, experience shows that the combination of policies that promote agriculture at the early stages of development and redistribute assets, especially human capital, toward the poor within a relatively open trade regime can go a long way toward combining rapid growth with rapid reduction of poverty.