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Pro-growth, pro-poor : is there a tradeoff?

  • Lopez, J. Humberto

Is a pro-growth strategy always the best pro-poor strategy? To address this issue, the author provides an empirical evaluation of the impact of a series of pro-growth policies on inequality and headcount poverty. He relies on a large macroeconomic data set and estimate dynamic panel models that allows him to differentiate between the short- and long-run impacts of the policies under consideration on growth, inequality, and poverty. The author's findings indicate that regardless of their impact on inequality, pro-growth policies lead to lower poverty levels in the long run. However, he also finds evidence indicating that some of these policies may lead tohigher inequality and, under plausible assumptions for the distribution of income, to higher poverty levels in the short run. These findings would justify the adoption of a pro-growth policy package as the center of any poverty reduction strategy, together with pro-poor measures that complement such a package by offsetting potential short-run increases in poverty.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 3378.

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Date of creation: 01 Aug 2004
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Handle: RePEc:wbk:wbrwps:3378
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