Dominance testing for ‘pro-poor’ growth with an application to European growth

Abstract

This article introduces statistical testing procedures to evaluate ‘pro-poor’ growth. Our measure of ‘pro-poorness’ follows Kakwani (J Quant Econ 16(1):67–80, 2000), Kakwani and Pernia (Asian Dev Rev 18(1):1–16, 2000), and Son (Econ Lett 82:307–314, 2004), who decompose the generalized Lorenz ordinates into a growth effect and an inequality effect. We derive an asymptotic distribution-free covariance matrix for the decomposed generalized Lorenz curves. Using this decomposition (and our standard errors), we test for pro-poor dominance in the growth process. We illustrate our test for the pro-poor dominance by evaluating the degree of pro-poor growth in five European countries.