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Inequality and the Impact of Growth on Poverty: Comparative Evidence for Sub-Saharan Africa

  • Augustin Kwasi Fosu

This study explores the extent to which inequality affects the impact of income growth on the rates of poverty changes in sub-Saharan Africa (SSA) compared to non-SSA, based on a global sample of 1977-2004 unbalanced panel data. For both regions and all three measures of poverty – headcount, gap and squared gap – the paper finds the impact of GDP growth on poverty reduction to be a decreasing function of initial inequality. The impacts are similar in direction for SSA and non-SSA, so that within both regions there are considerable disparities in the responsiveness of poverty to income growth, depending on inequality. Nevertheless, income-growth elasticity is substantially less for SSA, implying relatively low poverty-reduction sensitivity to growth compared with the rest of the developing world. Furthermore, the paper uncovers a considerable variation in the predicted values of income-growth elasticity across a large number of SSA countries. This implies there is a need to understand country-specific inequality attributes for poverty-reduction strategies to be effective.

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Paper provided by BWPI, The University of Manchester in its series Brooks World Poverty Institute Working Paper Series with number 9809.

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Date of creation: 2009
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Handle: RePEc:bwp:bwppap:9809
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  1. Adelman, Irma, 1975. "Development Economics-A Reassessment of Goals," American Economic Review, American Economic Association, vol. 65(2), pages 302-09, May.
  2. Kalwij, Adriaan & Verschoor, Arjan, 2007. "Not by growth alone: The role of the distribution of income in regional diversity in poverty reduction," European Economic Review, Elsevier, vol. 51(4), pages 805-829, May.
  3. Augustin Kwasi Fosu, 2008. "Inequality and the growth-poverty nexus: specification empirics using African data," Applied Economics Letters, Taylor & Francis Journals, vol. 15(7), pages 563-566.
  4. Theo S Eicher & Cecilia Garcia Penalosa, . "Inequality and Growth," Working Papers 0083, University of Washington, Department of Economics.
  5. Ravallion, Martin, 1997. "Can high-inequality developing countries escape absolute poverty?," Policy Research Working Paper Series 1775, The World Bank.
  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. Goldstein, Joshua S., 1985. "Basic human needs: The plateau curve," World Development, Elsevier, vol. 13(5), pages 595-609, May.
  8. 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, vol. 38(2), pages 275-295, April.
  9. Hicks, Norman & Streeten, Paul, 1979. "Indicators of development: The search for a basic needs yardstick," World Development, Elsevier, vol. 7(6), pages 567-580, June.
  10. Fosu, A. K., 2001. "Political instability and economic growth in developing economies: some specification empirics," Economics Letters, Elsevier, vol. 70(2), pages 289-294, February.
  11. François Bourguignon, 2002. "The growth elasticity of poverty reduction : explaining heterogeneity across countries and time periods," DELTA Working Papers 2002-03, DELTA (Ecole normale supérieure).
  12. Anne Epaulard, 2003. "Macroeconomic Performance and Poverty Reduction," IMF Working Papers 03/72, International Monetary Fund.
  13. Dollar, David & Kraay, Aart, 2001. "Growth is good for the poor," Policy Research Working Paper Series 2587, The World Bank.
  14. Adams, Richard Jr., 2004. "Economic Growth, Inequality and Poverty: Estimating the Growth Elasticity of Poverty," World Development, Elsevier, vol. 32(12), pages 1989-2014, December.
  15. Ravallion, Martin & Shaohua Chen, 1996. "What can new survey data tell us about recent changes in distribution and poverty?," Policy Research Working Paper Series 1694, The World Bank.
  16. Kakwani, Nanak, 1993. "Poverty and Economic Growth with Application to Cote d'Ivoire," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 39(2), pages 121-39, June.
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