Poverty and Patterns of Growth

This paper uses a recently constructed cross-country data set on absolute poverty to examine whether there is regional and sectoral variation in the relationship between poverty and economic growth. The poverty growth linkage is strongest in East Asia and that this linkage is essentially driven by growth in the industrial sector. By contrast, in Latin America, South Asia, and Sub-Saharan Africa, agriculture has had a greater impact on poverty reduction. We argue that these results should not be interpreted to mean that all regions other than East Asia need to emphasize agriculture to reduce poverty. Rather, these countries—especially labor-abundant ones such as those of South Asia—should attempt to improve their policy and institutional environments that stand in the way of their exploiting their comparative advantage in labor-intensive industries and bringing about a rapid reduction in poverty.