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The pro-poorness, growth and inequality nexus: Some findings from a simulation study

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  • Thomas Groll

    (University of Oregon)

  • Peter J. Lambert

    (University of Oregon)

Abstract

A widely accepted criterion for pro-poorness of an income growth pattern is that it should reduce a (chosen) measure of poverty by more than if all incomes were growing equiproportionately. Inequality reduction is not generally seen as either necessary or sufficient for pro-poorness. As shown in Lambert (2010), in order to conduct nuanced investigation of the pro-poorness, growth and inequality nexus, one needs at least a 3-parameter model of the income distribution. In this paper, we explore in detail the properties of inequality reduction and pro-poorness, using the Watts poverty index and Gini inequality index, when income growth takes place within each of the following models: the displaced lognormal, Singh-Maddala and Dagum distributions. We show by simulation, using empirically relevant parameter estimates, that distributional change preserving the form of each of these income distributions is, in the main, either pro-poor and inequality reducing, or pro-rich and inequality exacerbating. Instances of pro-rich and inequality reducing change do occur, but we find no evidence that distributional change could be both pro-poor and inequality exacerbating.

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File URL: http://www.ecineq.org/milano/WP/ECINEQ2011-214.pdf
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Bibliographic Info

Paper provided by ECINEQ, Society for the Study of Economic Inequality in its series Working Papers with number 214.

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Length: 20 pages
Date of creation: 2011
Date of revision:
Handle: RePEc:inq:inqwps:ecineq2011-214

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Keywords: poverty; growth; pro-poorness; income distribution.;

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References

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  1. Theo S Eicher & Cecilia Garcia Penalosa, . "Inequality and Growth," Discussion Papers in Economics at the University of Washington 0083, Department of Economics at the University of Washington.
  2. François Bourguignon, 2002. "The growth elasticity of poverty reduction : explaining heterogeneity across countries and time periods," DELTA Working Papers 2002-03, DELTA (Ecole normale supérieure).
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  12. Michael Grimm, 2005. "Removing the anonymity axiom in assessing pro-poor growth," Ibero America Institute for Econ. Research (IAI) Discussion Papers 113, Ibero-America Institute for Economic Research.
  13. Kalwij, Adriaan & Verschoor, Arjan, 2005. "A Decomposition of Poverty Trends across Regions: The Role of Variation in the Income and Inequality Elasticities of Poverty," Working Papers RP2005/36, World Institute for Development Economic Research (UNU-WIDER).
  14. Kleiber, Christian, 1996. "Dagum vs. Singh-Maddala income distributions," Economics Letters, Elsevier, vol. 53(3), pages 265-268, December.
  15. Kalwij, Adriaan & Verschoor, Arjan, 2007. "Not by growth alone: The role of the distribution of income in regional diversity in poverty reduction," European Economic Review, Elsevier, vol. 51(4), pages 805-829, May.
  16. Ravallion, Martin & Chen, Shaohua, 2003. "Measuring pro-poor growth," Economics Letters, Elsevier, vol. 78(1), pages 93-99, January.
  17. B. Essama-Nssah & Peter J. Lambert, 2009. "Measuring Pro-Poorness: A Unifying Approach With New Results," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 55(3), pages 752-778, 09.
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