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Income Distribution and Growth’s Ability to Reduce Poverty: Evidence from Rural and Urban African Economies

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  • Fosu, Augustin K.

Abstract

The present study examines the degree to which income distribution affects the ability of economic growth to reduce poverty, based on 1990s data for a sample of rural and urban sectors of African economies. Using the basic needs approach, an analysis-ofcovariance model is derived and estimated, with the headcount, gap and squared gap poverty ratios serving as the respective dependent variables and the Gini coefficient and PPP-adjusted incomes as explanatory variables. The study finds that the responsiveness of poverty to income growth is a decreasing function of inequality, albeit at varying rates for the three poverty measures: lowest for the headcount, followed by the gap and fastest for the squared gap. The ranges for the income elasticity in the sample are estimated at: 0.02-0.68, 0.11-1.05 and 0.10-1.35, respectively, for these poverty measures. Furthermore while, on average, the responsiveness of poverty to income growth appears to be the same between the rural and urban sectors, there are substantial sectoral differences across countries. The results suggest the need for country-specific emphases on growth relative to inequality, with special attention accorded the possible rural-urban dichotomy.

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File URL: http://www.wider.unu.edu/stc/repec/pdfs/wp2010/wp2010-92.pdf
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Bibliographic Info

Paper provided by World Institute for Development Economic Research (UNU-WIDER) in its series Working Paper Series with number wp2010-92.

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Length: 16 pages
Date of creation: 2010
Date of revision:
Handle: RePEc:unu:wpaper:wp2010-92

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Keywords: Income distribution; income growth; poverty; rural and urban African economies;

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Cited by:
  1. Tausch, Arno, 2011. "Costa Rica, superstar? some reflections on the global drivers and bottlenecks of the happy planet index," MPRA Paper 33226, University Library of Munich, Germany.
  2. Augustin Kwasi Fosu, 2011. "Growth, Inequality, and Poverty Reduction in Developing Countries: Recent Global Evidence," Economics Series Working Papers WPS/2011-07, University of Oxford, Department of Economics.
  3. Arno Tausch & Almas Heshmati, 2012. "Migration, Openness and the Global Preconditions of "Smart Development"," Bogazici Journal of Economics and Administrative Sciences, Bogazici University, Department of Economics, vol. 26(2), pages 1-62.

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