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Growth still is good for the poor

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  • Dollar, David
  • Kleineberg, Tatjana
  • Kraay, Aart

Abstract

Average incomes in the poorest two quintiles on average increase at the same rate as overall average incomes. This is because, in a global dataset spanning 121 countries over the past four decades, changes in the share of income of the poorest quintiles are uncorrelated with changes in average income. The variation in changes in quintile shares is also small relative to the variation in growth in average incomes, implying that the latter accounts for most of the variation in income growth in the poorest quintiles. In addition, we find little evidence that changes in the bottom quintile shares are correlated with country-level factors that are typically considered as important determinants for growth in average incomes or for changes in inequality. This evidence confirms the central importance of economic growth for improvements in living standards at the low end of the income distribution. It also illustrates the difficulty of identifying specific macroeconomic policies that are significantly associated with the growth rates of those in the poorest quintiles relative to everyone else.

Suggested Citation

  • Dollar, David & Kleineberg, Tatjana & Kraay, Aart, 2016. "Growth still is good for the poor," European Economic Review, Elsevier, vol. 81(C), pages 68-85.
  • Handle: RePEc:eee:eecrev:v:81:y:2016:i:c:p:68-85
    DOI: 10.1016/j.euroecorev.2015.05.008
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    More about this item

    Keywords

    Growth; Inequality;

    JEL classification:

    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty

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