The Relationship Between Poverty, Economic Growth, and Inequality Revisited
It has been shown in prior research that higher growth reduces poverty. Authors have also found that the effect of economic growth on changes in poverty has either diminished or remained unchanged over time, e.g., the 1980s economic expansion in the U.S. had no affect on poverty. Using a formal error-correction model, we find that increases in economic growth are significantly related to reductions in the poverty rate for all families. However, growth was found to have a more pronounced effect on poverty during the expansionary periods of the 1960s, 1970s, 1980s, and 1990s. Other findings include identification of determinants of the dynamic behavior of poverty rates both in the short and long-term.
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