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Growth, Inequality, and Poverty Reduction in Developing Countries: Recent Global Evidence

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  • Augustin Kwasi Fosu

Abstract

The study presents recent global evidence on the transformation of economic growth to poverty reduction in developing countries, with emphasis on the role of income inequality.� The focus is on the period since the early-mid-1990s when growth in these countries as a group has been relatively strong, surpassing that of the advanced economies.� Both regional and country-specific data are analyzed for the $1.25 and $2.50-level poverty headcount ratios using the most recent World Bank data.� The study finds that on average an income growth has been the major driving force behind both the declines and increases in poverty.� The study, however, documents substantial regional and country differences that are masked by this 'average' dominant-growth story.� While in the majority of countries, growth was the major factor behind falling or increasing poverty, inequality, nevertheless, played the crucial role in poverty behavior in a large number of countries.� And, even in those countries where growth has been the main driver of poverty-reduction, further progress could have occurred under relatively favorable income distribution.� For more efficient policymaking, therefore, idiosyncratic attributes of countries should be emphasized.� In general, high initial levels of inequality limit the effectiveness of growth in reducing poverty while growing inequality reduces poverty directly for a given level of growth.� It would seem judicious, therefore, to accord special attention to reducing inequality in certain countries where income distribution is especially unfavourable.� Unfortunately, the present study also points to the limited effects of growth and inequality-reducing policies in low-income countries.

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Bibliographic Info

Paper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number WPS/2011-07.

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Date of creation: 01 Mar 2011
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Handle: RePEc:oxf:wpaper:wps/2011-07

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Keywords: Growth; Inequality; Poverty; Developing countries;

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  1. Fosu, Augustin K., 2010. "Inequality, Income and Poverty: Comparative Global Evidence," Working Paper Series, World Institute for Development Economic Research (UNU-WIDER) wp2010-93, World Institute for Development Economic Research (UNU-WIDER).
  2. Augustin Kwasi Fosu, 2008. "Inequality and the growth-poverty nexus: specification empirics using African data," Applied Economics Letters, Taylor & Francis Journals, Taylor & Francis Journals, vol. 15(7), pages 563-566.
  3. Dollar, David & Kraay, Aart, 2002. " Growth Is Good for the Poor," Journal of Economic Growth, Springer, Springer, vol. 7(3), pages 195-225, September.
  4. Ravallion, M. & Datt, G., 1991. "Growth and Redistribution Components of Changes in Poverty Measures," Papers, World Bank - Living Standards Measurement 83, World Bank - Living Standards Measurement.
  5. Fosu, Augustin Kwasi, 2010. "Does inequality constrain poverty reduction programs? Evidence from Africa," Journal of Policy Modeling, Elsevier, Elsevier, vol. 32(6), pages 818-827, November.
  6. Ravallion, Martin & Shaohua Chen, 2004. "China's (uneven) progress against poverty," Policy Research Working Paper Series 3408, The World Bank.
  7. Fosu, Augustin Kwasi, 2008. "Inequality and the Impact of Growth on Poverty: Comparative Evidence for Sub-Saharan Africa," Working Paper Series, World Institute for Development Economic Research (UNU-WIDER) UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  8. Fosu, Augustin K., 2010. "Income Distribution and Growth’s Ability to Reduce Poverty: Evidence from Rural and Urban African Economies," Working Paper Series, World Institute for Development Economic Research (UNU-WIDER) wp2010-92, World Institute for Development Economic Research (UNU-WIDER).
  9. Datt, Gaurav & Ravallion, Martin, 1992. "Growth and redistribution components of changes in poverty measures : A decomposition with applications to Brazil and India in the 1980s," Journal of Development Economics, Elsevier, Elsevier, vol. 38(2), pages 275-295, April.
  10. Theo S Eicher & Cecilia Garcia Penalosa, . "Inequality and Growth," Discussion Papers in Economics at the University of Washington, Department of Economics at the University of Washington 0083, Department of Economics at the University of Washington.
  11. Ravallion, Martin, 1997. "Can high-inequality developing countries escape absolute poverty?," Policy Research Working Paper Series 1775, The World Bank.
  12. Ravallion, Martin, 2001. "Growth, Inequality and Poverty: Looking Beyond Averages," World Development, Elsevier, Elsevier, vol. 29(11), pages 1803-1815, November.
  13. 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.
  14. 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, Elsevier, vol. 51(4), pages 805-829, May.
  15. Ravallion, Martin & Chen, Shaohua & Sangraula, Prem, 2008. "Dollar a day revisited," Policy Research Working Paper Series 4620, The World Bank.
  16. Adams, Richard Jr., 2004. "Economic Growth, Inequality and Poverty: Estimating the Growth Elasticity of Poverty," World Development, Elsevier, Elsevier, vol. 32(12), pages 1989-2014, December.
  17. Anne Epaulard, 2003. "Macroeconomic Performance and Poverty Reduction," IMF Working Papers 03/72, International Monetary Fund.
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Cited by:
  1. Das, Gouranga, 2010. "Globalization, socio-institutional factors and North–South knowledge diffusion: Role of India and China as Southern growth progenitors," MPRA Paper 37252, University Library of Munich, Germany, revised 01 Aug 2011.
  2. Elbra, Ainsley D., 2013. "The forgotten resource curse: South Africa's poor experience with mineral extraction," Resources Policy, Elsevier, Elsevier, vol. 38(4), pages 549-557.
  3. Ge, Jianping & Lei, Yalin, 2013. "Mining development, income growth and poverty alleviation: A multiplier decomposition technique applied to China," Resources Policy, Elsevier, Elsevier, vol. 38(3), pages 278-287.
  4. Alex Cobham & Andrew Sumner, 2013. "Is it all about the tails? The Palma measure of income inequality," Working Papers 308, ECINEQ, Society for the Study of Economic Inequality.
  5. Luebker, Malte, 2012. "Income Inequality, Redistribution and Poverty: Contrasting rational choice and behavioural perspectives," Working Paper Series, World Institute for Development Economic Research (UNU-WIDER) UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  6. S. Annim & S. Mariwah & J. Sebu, 2012. "Spatial inequality and household poverty in Ghana," Brooks World Poverty Institute Working Paper Series, BWPI, The University of Manchester 16112, BWPI, The University of Manchester.
  7. Olumuyiwa Adedeji & Huancheng Du & Maxwell Opoku-Afari, 2013. "Inclusive Growth," IMF Working Papers 13/139, International Monetary Fund.
  8. Facundo Alvaredo & Leonardo Gasparini, 2013. "Recent Trends in Inequality and Poverty in Developing Countries," CEDLAS, Working Papers, CEDLAS, Universidad Nacional de La Plata 0151, CEDLAS, Universidad Nacional de La Plata.
  9. Alex Cobham, Andy Sumner, 2013. "Is It All About the Tails? The Palma Measure of Income Inequality-Working Paper 343," Working Papers, Center for Global Development 343, Center for Global Development.
  10. Page, John, 2012. "Aid, Structural Change and the Private Sector in Africa," Working Paper Series, World Institute for Development Economic Research (UNU-WIDER) UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).

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