When is Growth Pro-Poor? Cross-Country Evidence

IMF Working Papers, March 1, 2004

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When is Growth Pro-Poor? Cross-Country Evidence

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Bibliographic details

• Authors: Aart Kraay
• Published: March 1, 2004
• Series: IMF Working Papers
• DOI: https://doi.org/10.5089/9781451846676.001

Key findings and conclusions

• Growth is pro-poor if the poverty measure of interest falls.
• Three potential sources of pro-poor growth are identified:
  • (a) a high rate of growth of average incomes;
  • (b) a high sensitivity of poverty to growth in average incomes;
  • (c) a poverty-reducing pattern of growth in relative incomes.
• In the medium run, most of the variation in changes in poverty is due to growth of average incomes.
• Most of the remaining variation is due to poverty-reducing patterns of growth in relative incomes, rather than differences in the sensitivity of poverty to growth in average incomes.
• Cross-country evidence provides little guidance on policies and institutions that specifically promote the non-growth sources of pro-poor change (i.e., higher sensitivity or poverty-reducing relative-income growth).

Empirical approach (summary)

• The paper empirically decomposes changes in poverty in a large sample of developing countries into the three components listed above.
• The decomposition isolates the contribution of:
  • average income growth;
  • the sensitivity of poverty to average income growth; and
  • changes in the distribution of relative incomes.

Policy implications

• Policies and institutions that promote broad-based growth should be central to efforts to achieve pro-poor growth, given that most medium-run variation in poverty reduction is attributable to growth in average incomes.
• There is limited cross-country guidance from this evidence on which policies and institutions effectively promote the poverty-reducing patterns of relative-income growth or increase the sensitivity of poverty to average-income growth.

Subjects and keywords (as stated)

• Subjects: Economic growth, Inclusive growth, Income distribution, National accounts, Personal income, Poverty, Poverty measurement
• Keywords: average income, East Asia, Gini coefficient, growth, household income, Inclusive growth, Income distribution, income distribution matter, income growth, income percentile, Personal income, poverty, poverty gap, poverty measure, Poverty measurement, survey mean income, WP

Content in this bundle

• When is Growth Pro-Poor? Cross-Country Evidence - Aart Kraay -- IMF Working Paper 04/47
  • When is Growth Pro-Poor? Cross-Country Evidence - Aart Kraay -- IMF Working Paper 04/47 (Markdown version)
  • When is Growth Pro-Poor? Cross-Country Evidence - Aart Kraay -- IMF Working Paper 04/47 (PDF)