How to design the future? An economywide analysis of key industrial policies to boost pro-poor growth in DRC

The economic growth between 2005 and 2012 significantly increased the income of the rich, but also left the poor behind. This paper uses a CGE-microsimulation model to study the pro-poor effect of industrial policies—that have been proven to be relevant for engineering productive transformation, such as skill upgrade as well as those that are likely to strengthen the competitiveness of DRC agro-food products. The relevance of skill upgrading is clearly supported by the findings. The evidence showed that labor upskill has not only produced strong absolute and relative pro-poor effects, but also has the potential to lead to income convergence, where poor households’ gains were higher than the richer ones. The analysis has revealed the underestimated contribution of agro-food marketing and transportation efficiency. The major finding is that marketing efficiency favors the middle class, and households at the 5th percentile benefit less than the average population. The reason for this is that the improved marketing efficiency of agro-food products generates strong income growth that expanded the demand of food, other manufacturing products, and imports. Middle income groups benefited the most due to differences between domestic prices and import prices. With regard to transportation efficiency, the analysis found that efficiency growth in transportation of agro-food products generates strong pro-poor effects in absolute and relative terms and is likely to be particularly effective in leading to income convergence. The analysis indicated that the improved transportation efficiency has the potential not only to increase income and employment, but also to provide positive price impacts for both agro-food producers and consumers and benefits to all households, particularly for low-income households.