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The Relationship Between Poverty, Economic Growth, and Inequality Revisited

  • Lonnie K. Stevans

    (Hofstra University)

  • David N. Sessions

    (Hofstra University)

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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Paper provided by EconWPA in its series GE, Growth, Math methods with number 0502002.

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Length: 26 pages
Date of creation: 08 Feb 2005
Date of revision:
Handle: RePEc:wpa:wuwpge:0502002
Note: Type of Document - doc; pages: 26
Contact details of provider: Web page: http://econwpa.repec.org

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  1. Enders, Walter & Siklos, Pierre L, 2001. "Cointegration and Threshold Adjustment," Journal of Business & Economic Statistics, American Statistical Association, vol. 19(2), pages 166-76, April.
  2. Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March.
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  8. Adams, Richard H. Jr., 2003. "Economic growth, inequality, and poverty : findings from a new data set," Policy Research Working Paper Series 2972, The World Bank.
  9. Bruno, Michael & Ravallion, Martin & Squire, Lyn, 1996. "Equity and growth in developing countries : old and new perspectives on the policy issues," Policy Research Working Paper Series 1563, The World Bank.
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  11. Andrews, Donald W K, 1993. "Tests for Parameter Instability and Structural Change with Unknown Change Point," Econometrica, Econometric Society, vol. 61(4), pages 821-56, July.
  12. Dollar, David & Kraay, Aart, 2001. "Growth is good for the poor," Policy Research Working Paper Series 2587, The World Bank.
  13. Peter C.B. Phillips & Pierre Perron, 1986. "Testing for a Unit Root in Time Series Regression," Cowles Foundation Discussion Papers 795R, Cowles Foundation for Research in Economics, Yale University, revised Sep 1987.
  14. Hirsch, Barry T, 1980. "Poverty and Economic Growth: Has Trickle Down Petered Out?," Economic Inquiry, Western Economic Association International, vol. 18(1), pages 151-58, January.
  15. Klaus Deininger & Lyn Squire, 1996. "A New Data Set Measuring Income Inequality," CEMA Working Papers 512, China Economics and Management Academy, Central University of Finance and Economics.
  16. Rebecca M. Blank, 1999. "What Goes Up Must Come Down? Explaining Recent Changes in Public Assistance Caseloads," JCPR Working Papers 78, Northwestern University/University of Chicago Joint Center for Poverty Research.
  17. Peter C.B. Phillips & Bruce E. Hansen, 1988. "Statistical Inference in Instrumental Variables," Cowles Foundation Discussion Papers 869R, Cowles Foundation for Research in Economics, Yale University, revised Apr 1989.
  18. Hongyi Li & Lyn Squire & Tao Zhang & Heng-fu Zou, 1999. "A Data Set on Income Distribution," CEMA Working Papers 575, China Economics and Management Academy, Central University of Finance and Economics.
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