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Poverty accounting

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  • Bluhm, Richard
  • de Crombrugghe, Denis
  • Szirmai, Adam

Abstract

This paper proposes a new framework for poverty accounting, that is, the decomposition of poverty into its proximate components. Using aggregated household surveys from 124 countries, we estimate the potential impacts of income growth and redistribution on poverty rates, as well as their actual contributions to poverty reduction over the period from 1981 to 2010. Our fractional response approach shows that the potential impacts are highly non-linear and differ across regions and time. This non-linearity and variation need to be taken into account if empirical estimates are to inform development policy. Although historically growth has played the main role in poverty reduction, we find that initial inequality is a strong moderator of the impact of growth. In fact, there has been a shift towards pro-poor growth around the turn of the millennium, both at the $2 and at the $1.25 a day poverty line. Nevertheless, our projections of poverty rates until 2030 show that the end of extreme poverty within a generation, as put forth in the Sustainable Development Goals, is unlikely to materialize.

Suggested Citation

  • Bluhm, Richard & de Crombrugghe, Denis & Szirmai, Adam, 2018. "Poverty accounting," European Economic Review, Elsevier, vol. 104(C), pages 237-255.
  • Handle: RePEc:eee:eecrev:v:104:y:2018:i:c:p:237-255
    DOI: 10.1016/j.euroecorev.2018.03.003
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    References listed on IDEAS

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    Cited by:

    1. Richard Bluhm & Melanie Krause, 2018. "Top Lights - Bright Cities and their Contribution to Economic Development," CESifo Working Paper Series 7411, CESifo Group Munich.

    More about this item

    Keywords

    Poverty; Inequality; Growth; Fractional response models;

    JEL classification:

    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty
    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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