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Is Economic Growth Good for the Poor? Tracking Low Incomes Using General Means

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Author Info
James E. Foster
Miguel Székely
Abstract

In this paper we propose the use of an alternative methodology to track low incomes based on Atkinson`s (1970) family of "equally distributed equivalent income" functions, which are called "general means" here. We provide a new characterization of general means that justifies their use in this context. Our method of evaluating the effects of growth on poor incomes is based on a comparison of growth rates for two standards of living: the ordinary mean and a bottom-sensitive general mean. The motivating question is: To what extent is growth in the ordinary mean accompanied by growth in the general mean? A key indicator in this approach is the growth elasticity of the general mean, or the percentage change in the general mean over the percentage change in the usual mean. Our empirical analysis estimates this growth elasticity for a data set containing 144 household surveys from 20 countries over the last quarter century. Among other results, we find that the growth elasticity of bottom sensitive general means is positive, but significantly smaller than one. This suggests that the incomes of the poor do not grow one-for-one with increases in average income.

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Paper provided by Inter-American Development Bank, Research Department in its series RES Working Papers with number 4269.

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Date of creation: Jun 2001
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Handle: RePEc:idb:wpaper:4269

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  1. Anand, Sudhir & Kanbur, S M R, 1985. "Poverty under the Kuznets Process," Economic Journal, Royal Economic Society, vol. 95(380a), pages 42-50, Supplemen. [Downloadable!] (restricted)
  2. Ahluwalia, Montek S. & Carter, Nicholas G. & Chenery, Hollis B., 1979. "Growth and poverty in developing countries," Journal of Development Economics, Elsevier, vol. 6(3), pages 299-341, August. [Downloadable!] (restricted)
  3. 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. [Downloadable!]
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  4. Foster, James E & Shorrocks, Anthony F, 1988. "Poverty Orderings," Econometrica, Econometric Society, vol. 56(1), pages 173-77, January. [Downloadable!] (restricted)
  5. Panizza, Ugo, 2002. " Income Inequality and Economic Growth: Evidence from American Data," Journal of Economic Growth, Springer, vol. 7(1), pages 25-41, March. [Downloadable!] (restricted)
  6. Mattias Lundberg & Lyn Squire, 2003. "The simultaneous evolution of growth and inequality," Economic Journal, Royal Economic Society, vol. 113(487), pages 326-344, 04. [Downloadable!] (restricted)
  7. Charles Blackorby & David Donaldson & Maria Auersperg, 1981. "A New Procedure for the Measurement of Inequality within and among Population Subgroups," Canadian Journal of Economics, Canadian Economics Association, vol. 14(4), pages 665-85, November. [Downloadable!] (restricted)
  8. Atkinson, Anthony B., 1970. "On the measurement of inequality," Journal of Economic Theory, Elsevier, vol. 2(3), pages 244-263, September. [Downloadable!] (restricted)
  9. Ahluwalia, Montek S., 1976. "Inequality, poverty and development," Journal of Development Economics, Elsevier, vol. 3(4), pages 307-342, December. [Downloadable!] (restricted)
  10. Deaton, A., 2000. "Counting the World's Poor: Problems and Possible Solutions," Papers 197, Princeton, Woodrow Wilson School - Development Studies.
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  11. Li, Hongyi & Squire, Lyn & Zou, Heng-fu, 1998. "Explaining International and Intertemporal Variations in Income Inequality," Economic Journal, Royal Economic Society, vol. 108(446), pages 26-43, January. [Downloadable!] (restricted)
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  1. Ali Abdel Gadir Ali, . "Globalization and Inequality in the Arab Region," API-Working Paper Series 0307, Arab Planning Institute - Kuwait, Information Center. [Downloadable!]
  2. Eduardo Lora & Ugo Panizza, 2002. "Structural Reforms in Latin America under Scrutiny," RES Working Papers 4301, Inter-American Development Bank, Research Department. [Downloadable!]
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  3. Kraay, Aart, 2004. "When is growth pro-poor? Cross-country evidence," Policy Research Working Paper Series 3225, The World Bank. [Downloadable!]
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  4. Emanuele Baldacci & Gabriela Inchauste & Luiz de Mello, 2002. "Financial Crises, Poverty, and Income Distribution," IMF Working Papers 02/4, International Monetary Fund. [Downloadable!]
  5. Eduardo Lora & Ugo Panizza, 2002. "Las reformas estructurales en América Latina bajo la lupa," RES Working Papers 4302, Inter-American Development Bank, Research Department. [Downloadable!]
  6. 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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