Multidimensional poverty and growth: Evidence from India 1998–2021

Abstract

It is theoretically demonstrated that poverty is an essential aspect in shaping economic outcomes. However, empirical evidence on the impact of poverty on growth is still limited, especially concerning non-monetary deprivation. Using a state-level panel dataset from India over the period 1998–2021, this paper examines the growth effects of multidimensional poverty. We correct for endogeneity through an instrumental variable approach, exploiting variation in the duration of exposure to the cooked Mid-Day Meal Scheme across states. Our results indicate that the elasticity of growth to overall multidimensional poverty ranges from −0.3 to −0.4, although heterogeneity exists across partial indices, poverty subsets, and sub-components of the poverty index. For example, we find that improved educational attainment and nutrition among the poor contribute the most to growth, while sanitation exhibits the smallest effect. In most cases, however, the impact of the component indicators diminishes as economic inequality widens.