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Poverty and Growth in the WAEMU after the 1994 Devaluation

  • Jean-Paul Azam

This paper brings out that poverty increased massively in the wake of the 1994 devaluation of the CFA franc, despite a significant recovery of economic growth. Although this increase affected all the social groups, it fell mostly on the urban poor. An analytical model is presented, which explains this puzzle by the stratification of the labour market, assuming that the formal sector workers are at the same time the investors in the informal sector. Then, capital intensity in the latter increases as the former anticipate the cut in formal sector wages that the long-awaited devaluation brings about. Ex post, they run down their assets for consumption-smoothing purposes, thus de-capitalising the informal sector firms, with a negative impact on incomes in the (urban) informal sector. Copyright 2004, Oxford University Press.

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Article provided by Centre for the Study of African Economies (CSAE) in its journal Journal of African Economies.

Volume (Year): 13 (2004)
Issue (Month): 4 (December)
Pages: 536-562

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Handle: RePEc:oup:jafrec:v:13:y:2004:i:4:p:536-562
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  1. Fernandez, Raquel & Rodrik, Dani, 1991. "Resistance to Reform: Status Quo Bias in the Presence of Individual-Specific Uncertainty," American Economic Review, American Economic Association, vol. 81(5), pages 1146-55, December.
  2. Harris, John R & Todaro, Michael P, 1970. "Migration, Unemployment & Development: A Two-Sector Analysis," American Economic Review, American Economic Association, vol. 60(1), pages 126-42, March.
  3. Azam, Jean-Paul, 1997. "Public Debt and the Exchange Rate in the CFA France Zone," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 6(1), pages 54-84, March.
  4. Alberto Alesina & Allan Drazen, 1989. "Why are Stabilizations Delayed?," NBER Working Papers 3053, National Bureau of Economic Research, Inc.
  5. Demery, Lionel & Squire, Lyn, 1996. "Macroeconomic Adjustment and Poverty in Africa: An Emerging Picture," World Bank Research Observer, World Bank Group, vol. 11(1), pages 39-59, February.
  6. Foster, James & Greer, Joel & Thorbecke, Erik, 1984. "A Class of Decomposable Poverty Measures," Econometrica, Econometric Society, vol. 52(3), pages 761-66, May.
  7. Michael Grimm, 2001. "Macro-economic adjustment socio-demographic change, and the evolution of income distribution in Côte d'Ivoire. A decomposition by microsimulation," Working Papers DT/2001/12, DIAL (Développement, Institutions et Mondialisation).
  8. Aryeetey, Ernest & Udry, Christopher, 1997. "The Characteristics of Informal Financial Markets in Sub-Saharan Africa," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 6(1), pages 161-203, March.
  9. Rama,Martin G., 1998. "Wage misalignment in CFA countries: are labor market policies to blame?," Policy Research Working Paper Series 1873, The World Bank.
  10. Casella, Alessandra & Eichengreen, Barry, 1996. "Can Foreign Aid Accelerate Stabilisation?," Economic Journal, Royal Economic Society, vol. 106(436), pages 605-19, May.
  11. Jean Paul Azam & Bruno Biais & Magueye Dia & Christine Maurel, 2001. "Informal and Formal Credit Markets and Credit Rationing in C�te D'Ivoire," Oxford Review of Economic Policy, Oxford University Press, vol. 17(4), pages 520-534.
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