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The growth elasticity of poverty reduction : explaining heterogeneity across countries and time periods

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François Bourguignon

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Abstract

An identity links the rate of economic growth, the speed of poverty reduction and changes in the distribution of income during some time period in a given country. A few authors used that identity to understand the causes for observed changes in poverty and to identify the exact role of economic growth in poverty reduction. Yet, many empirical cross-country studies of the relationship between growth and poverty are based on linear regression models that are ill specified because they ignore that identity. This paper provides approximations that permit doing much better than these linear models. In particular, it gives closed-form solutions under the assumption that the underlying distribution of income is Log-normal. The second part of the paper analyzes the quality of these approximations in a sample of actual growth spells in developing countries. It turns out that the discrepancy between empirical and theoretical growth elasticities of poverty amounts to much less than 50 per cent and is mostly explained by distributional changes.

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Paper provided by DELTA (Ecole normale supérieure) in its series DELTA Working Papers with number 2002-03.

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Date of creation: 2002
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Handle: RePEc:del:abcdef:2002-03

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  1. Mitra, Pradeep & Yemtsiv, Ruslan, 2006. "Increasing inequality in transition economies : is there more to come?," Policy Research Working Paper Series 4007, The World Bank. [Downloadable!]
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    Other versions:
  3. Sandrine Mesplé-Somps & Charlotte Guénard, 2006. "Measuring Inequalities: Do The Surveys Give The Real Picture? Study Of Two Surveys In Cote D’Ivoire And Madagascar," Working Papers 18, ECINEQ, Society for the Study of Economic Inequality. [Downloadable!]
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    Other versions:
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  15. Lennart Erickson & Carl-Johan Dalgaard, 2007. "Solow Versus Harrod-Domar: Reexamining the Aid Costs of the First Millennium Development Goal," IMF Working Papers 06/284, International Monetary Fund. [Downloadable!]
  16. Charlotte Guénard & Sandrine Mesplé-Somps, 2004. "Mesurer les inégalités : que captent réellement les enquêtes ? Analyse de deux enquêtes ivoirienne et malgache," Working Papers DT/2004/13, DIAL (Développement, Institutions & Analyses de Long terme), revised Dec 2004. [Downloadable!]
  17. Denis Cogneau & Jean-David Naudet, 2004. "Who deserves aid? Equality of opportunity,international aid and poverty reduction," Working Papers DT/2004/10, DIAL (Développement, Institutions & Analyses de Long terme). [Downloadable!]
  18. Klump, Rainer & Prüfer, Patricia, 2005. "How to prioritise policies for poverty reduction: Applying Bayesian Model Averaging to Vietnam," Proceedings of the German Development Economics Conference, Kiel 2005 27, Verein für Socialpolitik, Research Committee Development Economics. [Downloadable!]
  19. Klump, Rainer & Pruefer, Patricia, 2006. "Prioritizing policies for pro-poor growth: applying bayesian model averaging to Vietnam," Discussion Paper 117, Tilburg University, Center for Economic Research. [Downloadable!]
  20. Kalwij, A.S. & Verschoor, A., 2004. "How good is growth for the poor? : the role of the initial income distribution in regional diversity in poverty trends," Discussion Paper 115, Tilburg University, Center for Economic Research. [Downloadable!]
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