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How Good is Growth for the Poor? The Role of Initial Income Distribution in Regional Diversity in Poverty Trends

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  • Kalwij, A.S.
  • Verschoor, A.

    (Tilburg University, Center for Economic Research)

Abstract

Using panel data of 58 developing countries for the period 1980-1998, this study shows that the responsiveness of the $2 a day poverty headcount measure to changes in mean income and inequality significantly decreases with initial inequality and the ratio poverty line over mean income - taken as proxies for the initial density of income near the poverty line.Variations in these proxies account for the large crossregional differences in the income elasticity of poverty during the 1980s and 1990s.We find that the income elasticity of poverty in the mid 1990s equals -1.31 on average and ranges from -0.71 for Sub-Saharan Africa to -2.27 for the Middle East and North Africa, and that the Gini elasticity of poverty equals 0.80 on average and ranges from 0.01 in South Asia to 1.73 in Latin America.While variation in income growth accounts for most of the variation in poverty reduction across regions, the impact of variations in inequality and in elasticities of poverty is almost always too large to be ignored, and in particular in Eastern Europe and Central Asia.

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Bibliographic Info

Paper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 2004-115.

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Date of creation: 2004
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Handle: RePEc:dgr:kubcen:2004115

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Web page: http://center.uvt.nl

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Keywords: Panel data; Poverty; Income Growth; Inequality;

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References

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  1. Dollar, David & Kraay, Aart, 2002. " Growth Is Good for the Poor," Journal of Economic Growth, Springer, vol. 7(3), pages 195-225, September.
  2. Ravallion, Martin, 1997. "Can high-inequality developing countries escape absolute poverty?," Policy Research Working Paper Series 1775, The World Bank.
  3. Ravallion, Martin, 2001. "Growth, Inequality and Poverty: Looking Beyond Averages," World Development, Elsevier, vol. 29(11), pages 1803-1815, November.
  4. Bigsten, Arne & Kebede, Bereket & Shimeles, Abebe & Taddesse, Mekonnen, 2003. "Growth and Poverty Reduction in Ethiopia: Evidence from Household Panel Surveys," World Development, Elsevier, vol. 31(1), pages 87-106, January.
  5. Foster, James & Greer, Joel & Thorbecke, Erik, 1984. "A Class of Decomposable Poverty Measures," Econometrica, Econometric Society, vol. 52(3), pages 761-66, May.
  6. Collier, Paul & Dollar, David, 2002. "Aid allocation and poverty reduction," European Economic Review, Elsevier, vol. 46(8), pages 1475-1500, September.
  7. Anne Epaulard, 2003. "Macroeconomic Performance and Poverty Reduction," IMF Working Papers 03/72, International Monetary Fund.
  8. Deininger, Klaus & Squire, Lyn, 1998. "New ways of looking at old issues: inequality and growth," Journal of Development Economics, Elsevier, vol. 57(2), pages 259-287.
  9. John Gibson, 2000. "The impact of growth and distribution on poverty in Papua New Guinea," Applied Economics Letters, Taylor & Francis Journals, vol. 7(9), pages 605-607.
  10. Bruno, Michael & Ravallion, Martin & Squire, Lyn, 1996. "Equity and growth in developing countries : old and new perspectives on the policy issues," Policy Research Working Paper Series 1563, The World Bank.
  11. Paul Mosley & John Hudson & Arjan Verschoor, 2004. "Aid, Poverty Reduction and the 'New Conditionality'," Economic Journal, Royal Economic Society, vol. 114(496), pages F217-F243, 06.
  12. Angus Deaton, 2005. "ERRATUM: Measuring Poverty in a Growing World (or Measuring Growth in a Poor World)," The Review of Economics and Statistics, MIT Press, vol. 87(2), pages 395-395, May.
  13. James E. Foster & Miguel Székely, 2001. "Is Economic Growth Good for the Poor? Tracking Low Incomes Using General Means," Research Department Publications 4269, Inter-American Development Bank, Research Department.
  14. Ravallion, Martin & Huppi, Monika, 1991. "Measuring Changes in Poverty: A Methodological Case Study of Indonesia during an Adjustment Period," World Bank Economic Review, World Bank Group, vol. 5(1), pages 57-82, January.
  15. Ravallion, Martin & Shaohua Chen, 1996. "What can new survey data tell us about recent changes in distribution and poverty?," Policy Research Working Paper Series 1694, The World Bank.
  16. Kakwani, Nanak, 1993. "Poverty and Economic Growth with Application to Cote d'Ivoire," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 39(2), pages 121-39, June.
  17. Timothy Besley & Robin Burgess, 2003. "Halving Global Poverty," Journal of Economic Perspectives, American Economic Association, vol. 17(3), pages 3-22, Summer.
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Cited by:
  1. Leonardo Gasparini & Federico Gutiérrez & Leopoldo Tornarolli, 2005. "Growth and Income Poverty in Latin America and the Caribbean: Evidence from Household Surveys," CEDLAS, Working Papers 0030, CEDLAS, Universidad Nacional de La Plata.

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