IDEAS home Printed from https://ideas.repec.org/p/wfo/wpaper/y2011i406.html
   My bibliography  Save this paper

Determinants of the Growth Elasticity of Poverty Reduction. Why the Impact on Poverty Reduction is Large in Some Developing Countries and Small in Others

Author

Listed:
  • Christina Wieser

Abstract

This paper investigates the determinants of the growth elasticity of poverty by using the internationally designed poverty line, measured by the share of the population living below USD 1.25 per day. We identify the determinants of changes in the poverty rate of countries using single and multiple OLS regressions as well as fixed effects. Empirical evidence underlying this study included 268 observations in 65 developing countries from 1983 to 2009. The two main results are firstly, that growth is important to poverty reduction and secondly, that the coefficient "growth elasticity of poverty reduction" varies with human capital, openness to trade, government expenditure, institutional quality and democracy, and that additionally human capital, openness to trade and FDI are impacting poverty reduction directly without changing the elasticity significantly. The tentative policy conclusion for a developing country trying to reduce poverty is, first to focus on growth but secondly to complement this strategy by policies aimed at increasing human capital and openness.

Suggested Citation

  • Christina Wieser, 2011. "Determinants of the Growth Elasticity of Poverty Reduction. Why the Impact on Poverty Reduction is Large in Some Developing Countries and Small in Others," WIFO Working Papers 406, WIFO.
    • Handle: RePEc:wfo:wpaper:y:2011:i:406
    as

    Download full text from publisher

    File URL: https://www.wifo.ac.at/wwa/pubid/43042
    File Function: abstract
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Ravallion, Martin & Chen, Shaohua, 1997. "What Can New Survey Data Tell Us about Recent Changes in Distribution and Poverty?," The World Bank Economic Review, World Bank, vol. 11(2), pages 357-382, May.
    2. Dollar, David & Kraay, Aart, 2002. "Growth Is Good for the Poor," Journal of Economic Growth, Springer, vol. 7(3), pages 195-225, September.
    3. Berg, Andrew & Ostry, Jonathan D. & Zettelmeyer, Jeromin, 2012. "What makes growth sustained?," Journal of Development Economics, Elsevier, vol. 98(2), pages 149-166.
    4. Loayza, Norman V. & Raddatz, Claudio, 2010. "The composition of growth matters for poverty alleviation," Journal of Development Economics, Elsevier, vol. 93(1), pages 137-151, September.
    5. Borensztein, E. & De Gregorio, J. & Lee, J-W., 1998. "How does foreign direct investment affect economic growth?1," Journal of International Economics, Elsevier, vol. 45(1), pages 115-135, June.
    6. J. Humberto Lopez, 2009. "Pro-Growth, Pro-Poor: Is There a Trade-off?," Chapters, in: Robert J. Brent (ed.), Handbook of Research on Cost–Benefit Analysis, chapter 18, Edward Elgar Publishing.
    7. Commission on Growth and Development, 2008. "The Growth Report : Strategies for Sustained Growth and Inclusive Development," World Bank Publications - Books, The World Bank Group, number 6507, December.
    8. Acemoglu, Daron & Johnson, Simon & Robinson, James A., 2005. "Institutions as a Fundamental Cause of Long-Run Growth," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 6, pages 385-472, Elsevier.
    9. Tavares, Jose & Wacziarg, Romain, 2001. "How democracy affects growth," European Economic Review, Elsevier, vol. 45(8), pages 1341-1378, August.
    10. Ravallion, Martin, 2004. "Pro-poor growth : A primer," Policy Research Working Paper Series 3242, The World Bank.
    11. Alfaro, Laura & Chanda, Areendam & Kalemli-Ozcan, Sebnem & Sayek, Selin, 2010. "Does foreign direct investment promote growth? Exploring the role of financial markets on linkages," Journal of Development Economics, Elsevier, vol. 91(2), pages 242-256, March.
    12. Philippe Aghion & Steven Durlauf (ed.), 2005. "Handbook of Economic Growth," Handbook of Economic Growth, Elsevier, edition 1, volume 1, number 1.
    13. Shaohua Chen & Martin Ravallion, 2010. "The Developing World is Poorer than We Thought, But No Less Successful in the Fight Against Poverty," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 125(4), pages 1577-1625.
    14. Lin, Justin Yifu & Monga, Celestin, 2010. "The growth report and new structural economics," Policy Research Working Paper Series 5336, The World Bank.
    15. Kraay, Aart, 2006. "When is growth pro-poor? Evidence from a panel of countries," Journal of Development Economics, Elsevier, vol. 80(1), pages 198-227, June.
    16. David Dollar & Aart Kraay, 2004. "Trade, Growth, and Poverty," Economic Journal, Royal Economic Society, vol. 114(493), pages 22-49, February.
    17. Theo S Eicher & Cecilia Garcia Penalosa, "undated". "Inequality and Growth," Working Papers 0083, University of Washington, Department of Economics.
    18. Arbache, Jorge Saba & Page, John, 2007. "Patterns of long term growth in Sub-Saharan Africa," Policy Research Working Paper Series 4398, The World Bank.
    19. Andy Sumner, 2010. "Global Poverty and the New Bottom Billion: Three-Quarters of the World’s Poor Live in Middle-Income Countries," One Pager 120, International Policy Centre for Inclusive Growth.
    20. Andy Sumner, 2010. "Global Poverty and the New Bottom Billion: What if Three-quarters of the World’s Poor Live in Middle-income Countries?," Working Papers 74, International Policy Centre for Inclusive Growth.
    21. Hyun H. Son & Nanak Kakwani, 2004. "Economic growth and poverty reduction: initial conditions matter," Working Papers 2, International Policy Centre for Inclusive Growth.
    22. Kaufmann, Daniel & Kraay, Aart & Mastruzzi, Massimo, 2010. "The worldwide governance indicators : methodology and analytical issues," Policy Research Working Paper Series 5430, The World Bank.
    23. Henderson, J. Vernon, 2005. "Urbanization and Growth," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 24, pages 1543-1591, Elsevier.
    24. Francois Bourguignon, 2004. "The Poverty-growth-inequality triangle," Indian Council for Research on International Economic Relations, New Delhi Working Papers 125, Indian Council for Research on International Economic Relations, New Delhi, India.
    25. Alfredo Saad-Filho, 2010. "Growth, Poverty and Inequality: From Washington Consensus to Inclusive Growth," Working Papers 100, United Nations, Department of Economics and Social Affairs.
    26. Niloy Bose & M. Emranul Haque & Denise R. Osborn, 2007. "Public Expenditure And Economic Growth: A Disaggregated Analysis For Developing Countries," Manchester School, University of Manchester, vol. 75(5), pages 533-556, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Oyamada, Kazuhiko & Uchida, Yoko, 2011. "Production patterns of Multinational Firms: Horizontal and Vertical Multinationals with traded intermediates," Conference papers 332063, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    2. Patrick Guillaumont & Laurent Wagner, 2014. "Aid Effectiveness for Poverty Reduction: Lessons from Cross‑country Analyses, with a Special Focus on Vulnerable Countries," Revue d’économie du développement, De Boeck Université, vol. 22(HS01), pages 217-261.
    3. Aiyemo, Babatunde, 2020. "Recessions and the vulnerable," World Development, Elsevier, vol. 132(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Oyamada, Kazuhiko & Uchida, Yoko, 2011. "Production patterns of Multinational Firms: Horizontal and Vertical Multinationals with traded intermediates," Conference papers 332063, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    2. Ademola Obafemi YOUNG, 2019. "Why Has Growth Not Trickled Down to the Poor? A Study of Nigeria," Review of European Studies, Canadian Center of Science and Education, vol. 11(1), pages 156-156, December.
    3. Desire Avom & Fabrizio Carmignani & Abdour Chowdhury, "undated". "Four Scenarios of Poverty Reduction and the Role of Economic Policy," MRG Discussion Paper Series 3109, School of Economics, University of Queensland, Australia.
    4. Ansgar Belke & Andreas Wernet, 2015. "Poverty Reduction through Growth and Redistribution Policies—a Panel Analysis for 59 Developing Countries," Review of Development Economics, Wiley Blackwell, vol. 19(1), pages 143-162, February.
    5. Gustavo A. Marrero & Luis Servén, 2022. "Growth, inequality and poverty: a robust relationship?," Empirical Economics, Springer, vol. 63(2), pages 725-791, August.
    6. Klump, R. & Prüfer, P., 2006. "Prioritizing Policies for Pro-Poor Growth : Applying Bayesian Model Averaging to Vietnam," Other publications TiSEM dc14add6-f581-4eea-92dd-3, Tilburg University, School of Economics and Management.
    7. T. M. Tonmoy Islam, 2016. "Estimating the Elasticity of Growth in the US Using the Generalized Means of Income," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 129(1), pages 95-112, October.
    8. Bluhm R & Crombrugghe D.P.I. de & Szirmai A., 2013. "The pace of poverty reduction - A fractional response approach," MERIT Working Papers 2013-051, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    9. Facundo Alvaredo & Leonardo Gasparini, 2013. "Recent Trends in Inequality and Poverty in Developing Countries," CEDLAS, Working Papers 0151, CEDLAS, Universidad Nacional de La Plata.
    10. Fabrizio Carmignani, 2011. "The Making of Pro‐Poor Growth," Scottish Journal of Political Economy, Scottish Economic Society, vol. 58(5), pages 656-684, November.
    11. Loayza, Norman V. & Raddatz, Claudio, 2010. "The composition of growth matters for poverty alleviation," Journal of Development Economics, Elsevier, vol. 93(1), pages 137-151, September.
    12. Tarlok Singh, 2022. "Economic growth and the state of poverty in India: sectoral and provincial perspectives," Economic Change and Restructuring, Springer, vol. 55(3), pages 1251-1302, August.
    13. Beck, Thorsten & Demirguc-Kunt, Asli & Levine, Ross, 2004. "Finance, inequality, and poverty: cross-country evidence," Policy Research Working Paper Series 3338, The World Bank.
    14. Prüfer, P. & Tondl, G., 2008. "The FDI-Growth Nexus in Latin America : The Role of Source Countries and Local Conditions," Other publications TiSEM 73b28850-1597-4bcb-a76c-1, Tilburg University, School of Economics and Management.
    15. Francesco Farina, 2016. "The Path Dependency of Poverty Reduction Policies," HISTORY OF ECONOMIC THOUGHT AND POLICY, FrancoAngeli Editore, vol. 2016(1), pages 21-42.
    16. Kunal Sen, 2014. "Inclusive Growth: When May We Expect It? When May We Not?," Asian Development Review, MIT Press, vol. 31(1), pages 136-162, March.
    17. Richard Bluhm & Denis de Crombrugghe & Adam Szirmai, 2016. "Poverty Accounting. A fractional response approach to poverty decomposition," Working Papers 413, ECINEQ, Society for the Study of Economic Inequality.
    18. Kouadio, Hugues Kouassi & Gakpa, Lewis-Landry, 2022. "Do economic growth and institutional quality reduce poverty and inequality in West Africa?," Journal of Policy Modeling, Elsevier, vol. 44(1), pages 41-63.
    19. Djeneba Doumbia, 2019. "The quest for pro-poor and inclusive growth: the role of governance," Applied Economics, Taylor & Francis Journals, vol. 51(16), pages 1762-1783, April.
    20. Montfort Mlachila & René Tapsoba & Sampawende J. A. Tapsoba, 2017. "A Quality of Growth Index for Developing Countries: A Proposal," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 134(2), pages 675-710, November.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wfo:wpaper:y:2011:i:406. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Florian Mayr (email available below). General contact details of provider: https://edirc.repec.org/data/wifooat.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.