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Is Economic Growth Good for the Poor? Tracking Low Incomes Using General Means

  • James E. Foster
  • Miguel Székely

In this paper we propose the use of an alternative methodology to track low incomes based on Atkinson`s (1970) family of "equally distributed equivalent income" functions, which are called "general means" here. We provide a new characterization of general means that justifies their use in this context. Our method of evaluating the effects of growth on poor incomes is based on a comparison of growth rates for two standards of living: the ordinary mean and a bottom-sensitive general mean. The motivating question is: To what extent is growth in the ordinary mean accompanied by growth in the general mean? A key indicator in this approach is the growth elasticity of the general mean, or the percentage change in the general mean over the percentage change in the usual mean. Our empirical analysis estimates this growth elasticity for a data set containing 144 household surveys from 20 countries over the last quarter century. Among other results, we find that the growth elasticity of bottom sensitive general means is positive, but significantly smaller than one. This suggests that the incomes of the poor do not grow one-for-one with increases in average income.

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Paper provided by Inter-American Development Bank, Research Department in its series Research Department Publications with number 4269.

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Date of creation: Jun 2001
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Handle: RePEc:idb:wpaper:4269
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  1. Atkinson, Anthony B., 1970. "On the measurement of inequality," Journal of Economic Theory, Elsevier, vol. 2(3), pages 244-263, September.
  2. Li, Hongyi & Squire, Lyn & Zou, Heng-fu, 1998. "Explaining International and Intertemporal Variations in Income Inequality," Economic Journal, Royal Economic Society, vol. 108(446), pages 26-43, January.
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  4. Ravallion, Martin & Chen, Shaohua, 1997. "What Can New Survey Data Tell Us about Recent Changes in Distribution and Poverty?," World Bank Economic Review, World Bank Group, vol. 11(2), pages 357-82, May.
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  7. Panizza, Ugo, 2002. " Income Inequality and Economic Growth: Evidence from American Data," Journal of Economic Growth, Springer, vol. 7(1), pages 25-41, March.
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  9. James E. Foster & Artyom A. Shneyerov, 1999. "A general class of additively decomposable inequality measures," Economic Theory, Springer, vol. 14(1), pages 89-111.
  10. Mattias Lundberg & Lyn Squire, 2003. "The simultaneous evolution of growth and inequality," Economic Journal, Royal Economic Society, vol. 113(487), pages 326-344, 04.
  11. Smolensky, Eugene, et al, 1994. "Growth, Inequality, and Poverty: A Cautionary Note," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 40(2), pages 217-22, June.
  12. de Janvry, Alain & Sadoulet, Elisabeth, 2000. "Growth, Poverty, and Inequality in Latin America: A Causal Analysis, 1970-94," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 46(3), pages 267-87, September.
  13. Atkinson, A.B. & Brandolini, A., 2000. "Promise and Pitfalls in the Use of 'Secondary' Data -Sets: Income Inequality in OECD Countries," Papers 379, Banca Italia - Servizio di Studi.
  14. Deaton, A., 2000. "Counting the World's Poor: Problems and Possible Solutions," Papers 197, Princeton, Woodrow Wilson School - Development Studies.
  15. Sen, Amartya, 1997. "On Economic Inequality," OUP Catalogue, Oxford University Press, number 9780198292975, March.
  16. Charles Blackorby & David Donaldson & Maria Auersperg, 1981. "A New Procedure for the Measurement of Inequality within and among Population Subgroups," Canadian Journal of Economics, Canadian Economics Association, vol. 14(4), pages 665-85, November.
  17. Anand, Sudhir & Kanbur, S M R, 1985. "Poverty under the Kuznets Process," Economic Journal, Royal Economic Society, vol. 95(380a), pages 42-50, Supplemen.
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