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When is Growth Pro-Poor? Cross-Country Evidence

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  • Aart Kraay

Abstract

Growth is pro-poor if the poverty measure of interest falls. This implies three potential sources of pro-poor growth: (a) a high rate of growth of average incomes; (b) a high sensitivity of poverty to growth in average incomes; and (c) a poverty-reducing pattern of growth in relative incomes. I empirically decompose changes in poverty in a large sample of developing countries into these components. In the medium run, most of the variation in changes in poverty is due to growth, suggesting that policies and institutions that promote broad-based growth should be central to pro-poor growth. Most of the remainder is due to poverty-reducing patterns of growth in relative incomes, rather than differences in the sensitivity of poverty to growth in average incomes. Cross-country evidence provides little guidance on policies and institutions that promote these other sources of pro-poor growth.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 04/47.

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Length: 35
Date of creation: 01 Mar 2004
Date of revision:
Handle: RePEc:imf:imfwpa:04/47

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Keywords: Poverty; Poverty reduction; Income distribution; Economic growth; Developing countries; pro-poor growth; changes in poverty; pro-poor; distributional change; poverty line; squared poverty gap; distribution of income; gini coefficient; dependent variable; income growth; poverty changes; average income growth; measure of poverty; household surveys; headcount measure of poverty; country evidence; decomposition techniques; household survey; welfare function; social welfare; particular poverty measure; inequality measure; changes in inequality; inequality convergence; changes in policy; inequality measures; changes in distribution; measuring poverty; household income; relative poverty; purchasing power; poor growth strategies; measures of inequality; inequality aversion; high-inequality developing countries; analysis of poverty; household survey data; growth pro-poor; reducing inequality; gini index; poverty monitoring;

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References

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  1. Branko Milanovic, 2003. "Can We Discern The Effect Of Globalization On Income Distribution? Evidence From Household Surveys," HEW 0310002, EconWPA.
  2. Hongyi Li & Lyn Squire & Heng-fu Zou, 1998. "Explaining International and Intertemporal Variations in Income Inequality," CEMA Working Papers 73, China Economics and Management Academy, Central University of Finance and Economics.
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  12. Milanovic, Branko, 2002. "Can we discern the effect of globalization on income distribution? evidence from household budget surveys," Policy Research Working Paper Series 2876, The World Bank.
  13. Ravallion, Martin, 1997. "Can high-inequality developing countries escape absolute poverty?," Policy Research Working Paper Series 1775, The World Bank.
  14. Ravallion, Martin & Chen, Shaohua, 1997. "What Can New Survey Data Tell Us about Recent Changes in Distribution and Poverty?," World Bank Economic Review, World Bank Group, vol. 11(2), pages 357-82, May.
  15. Ravallion, Martin, 2003. "Inequality convergence," Economics Letters, Elsevier, vol. 80(3), pages 351-356, September.
  16. Mattias Lundberg & Lyn Squire, 2003. "The simultaneous evolution of growth and inequality," Economic Journal, Royal Economic Society, vol. 113(487), pages 326-344, 04.
  17. Barro, Robert J, 2000. " Inequality and Growth in a Panel of Countries," Journal of Economic Growth, Springer, vol. 5(1), pages 5-32, March.
  18. Sarabia, J. -M. & Castillo, Enrique & Slottje, Daniel J., 1999. "An ordered family of Lorenz curves," Journal of Econometrics, Elsevier, vol. 91(1), pages 43-60, July.
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