Making Growth Inclusive? Do Government Transfers Moderate the Effect of Economic Growth on Absolute and Relative Child Poverty?

Economic growth is commonly seen as the main driver of poverty reduction in a global perspective, but its impact varies substantially across cases. Meanwhile, the literature has been relatively silent regarding the role of social policy in explaining this variation. In light of an emerging attention to redistribution and social protection in promoting inclusive growth, this article analyses how government cash transfer systems moderate the effect of economic growth on both relative and absolute child poverty across low- and middle-income countries. The empirical analyses compare trends within 16 countries, using data from the Luxembourg Income Study (LIS), by means of descriptive analyses and multivariate regression techniques. Findings show that, in addition to growth, the expansion of government transfer schemes was associated with falling absolute child poverty rates. Despite the absence of an association between growth and relative child poverty on average, growth was found to be related to reductions in relative child poverty when combined with sufficiently extensive government transfers. These findings highlight the fruitfulness of including indicators on social protection policies when inquiring about enabling conditions for inclusive growth in a development context.