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Economic growth and contraction and their impact on the poor

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  • Brett Inder

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Abstract

This paper considers the relationship between growth in real per capita GDP and the growth in real per capita GDP of the poorest 20% of a country. It uses the data set compiled by Dollar and Kraay (2002), but come to very different conclusions. We argue that if the purpose is to answer questions about the impact of growth on the poor, models are best estimated in growth rates. The empirical results show that growth's impact on the poor occurs in two episodes. First, in periods of sustained economic slowdown (negative growth over a period of at least 5 years), the poor clearly suffer more than the average. In contrast, where economies are growing, the poor do not benefit as much as the average. We also find that the poor benefit from growth less in periods of high inflation, and in countries with low average income.

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File URL: http://www.buseco.monash.edu.au/ebs/pubs/wpapers/2004/wp3-04.pdf
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Bibliographic Info

Paper provided by Monash University, Department of Econometrics and Business Statistics in its series Monash Econometrics and Business Statistics Working Papers with number 3/04.

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Length: 24 pages
Date of creation: Feb 2004
Date of revision:
Handle: RePEc:msh:ebswps:2004-3

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Keywords: Economic Growth; Growth and Inequality; Economic Contraction; Inflation and Growth.;

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References

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  1. Hongyi Li & Lyn Squire & Tao Zhang & Heng-fu Zou, 1999. "A Data Set on Income Distribution," CEMA Working Papers 575, China Economics and Management Academy, Central University of Finance and Economics.
  2. M Arellano & O Bover, 1990. "Another Look at the Instrumental Variable Estimation of Error-Components Models," CEP Discussion Papers dp0007, Centre for Economic Performance, LSE.
  3. Chang, Gene H., 2002. "The cause and cure of China's widening income disparity," China Economic Review, Elsevier, vol. 13(4), pages 335-340, December.
  4. Dollar, David & Kraay, Aart, 2002. " Growth Is Good for the Poor," Journal of Economic Growth, Springer, vol. 7(3), pages 195-225, September.
  5. Ravallion, Martin, 2001. "Growth, Inequality and Poverty: Looking Beyond Averages," World Development, Elsevier, vol. 29(11), pages 1803-1815, November.
  6. Kanbur Ravi, 2001. "Economic Policy, Distribution and Poverty: The Nature of Disagreements," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 7(2), pages 1-26, April.
  7. R Blundell & Steven Bond, . "Initial conditions and moment restrictions in dynamic panel data model," Economics Papers W14&104., Economics Group, Nuffield College, University of Oxford.
  8. Perotti, Roberto, 1996. " Growth, Income Distribution, and Democracy: What the Data Say," Journal of Economic Growth, Springer, vol. 1(2), pages 149-87, June.
  9. Easterly, William, 2001. "The effect of International Monetary Fund and World Bank programs on poverty," Policy Research Working Paper Series 2517, The World Bank.
  10. Kristin J. Forbes, 2000. "A Reassessment of the Relationship between Inequality and Growth," American Economic Review, American Economic Association, vol. 90(4), pages 869-887, September.
  11. Agenor, Pierre-Richard, 2001. "Business cycles, economic crises, and the poor : testing for asymmetric effects," Policy Research Working Paper Series 2700, The World Bank.
  12. Klaus Deininger & Lyn Squire, 1996. "A New Data Set Measuring Income Inequality," CEMA Working Papers 512, China Economics and Management Academy, Central University of Finance and Economics.
  13. Jonathan Temple, 1999. "The New Growth Evidence," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 112-156, March.
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Cited by:
  1. Lawn, Philip & Clarke, Matthew, 2010. "The end of economic growth? A contracting threshold hypothesis," Ecological Economics, Elsevier, vol. 69(11), pages 2213-2223, September.

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