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Inflation Inequity and the Measurement of Pro-Poor Growth

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  • Grimm, Michael
  • Günther, Isabel

Abstract

Despite the recent and intense debate on how to define and measure pro-poor growth, there is one important issue which has so far not received sufficient attention: how applications of pro-poor growth measurements can appropriately take into account relative price changes, which, given the heterogeneity of consumption patters across the income distribution, often lead to significant inflation inequality. We show that incorporating inflation inequality into pro-poor growth measurements is not only a methodological necessity but if ignored can seriously bias assessments of the pro-poorness of growth. Using household expenditure surveys, we suggest simple methodologies which are able to redress such biases and appropriately reflect the changes of relative prices and the development of the purchasing power of the poor in pro-poor growth measurements. Empirically, we illustrate our concepts for the case of Burkina Faso using growth incidence curves and poverty change decompositions as pro-poor growth measurements. --

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Paper provided by Verein für Socialpolitik, Research Committee Development Economics in its series Proceedings of the German Development Economics Conference, Kiel 2005 with number 17.

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Date of creation: 2005
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Handle: RePEc:zbw:gdec05:3490

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Keywords: Pro-Poor Growth; Differential Inflation; Burkina Faso;

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  1. Slesnick, Daniel T, 1993. "Gaining Ground: Poverty in the Postwar United States," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 101(1), pages 1-38, February.
  2. 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.
  3. Bart Hobijn & David Lagakos, 2003. "Inflation inequality in the United States," Staff Reports, Federal Reserve Bank of New York 173, Federal Reserve Bank of New York.
  4. Angus Deaton, 1998. "Getting Prices Right: What Should Be Done?," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 12(1), pages 37-46, Winter.
  5. Asep Suryahadi & Sudarno Sumarto & Lant Pritchett, 2003. "Evolution of Poverty During the Crisis in Indonesia," Asian Economic Journal, East Asian Economic Association, East Asian Economic Association, vol. 17(3), pages 221-241, 09.
  6. Stephan Klasen, 2004. "In Search of the Holy Grail: How to Achieve Pro-Poor Growth?," Macroeconomics, EconWPA 0401005, EconWPA.
  7. Kilpatrick, Robert W, 1973. "The Income Elasticity of the Poverty Line," The Review of Economics and Statistics, MIT Press, vol. 55(3), pages 327-32, August.
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