Poverty and Inequality in Malawi: Trends, Prospects, and Policy Simulations

Using data from the third integrated household survey the paper has performs forward-looking conditional and unconditional policy simulations. Results from the unconditional simulations reveal that Malawi's exclusive focus on growth while ignoring inequality would have little or no impact on poverty reduction by 2020. Massive but unlikely levels of growth would be required to reduce poverty. The results further indicate that a modest combination of consumption growth of 10% and a reduction in inequality to 2004 levels would be associated with a projected poverty incidence of 38% in 2020, which is substantially below the level of poverty in 2011 of 51%. Results from the conditional simulations which condition on determinants of poverty reveal that the impact of changes in years of education on projected poverty levels is gender-differentiated. Precisely, if the years of schooling for females were to rise by one year by 2020, then 39% of the population would be poor. In stark contrast, 40% of the population would be poor as a result of an identical change in the years of schooling of males. Thus, going forward education gender-sensitive policy interventions which target women's education would have far reaching consequences on poverty alleviation in Malawi.