When is growth pro-poor? Evidence from a panel of countries

Abstract

Growth is pro-poor if the poverty measure of interest falls. According to this definition there are three potential sources of pro-poor growth: (a) a high growth rate of average incomes; (b) a high sensitivity of poverty to growth in average incomes; and (c) a poverty-reducing pattern of growth in relative incomes. I empirically decompose changes in poverty in a sample of developing countries during the 1980s and 1990s into these three components. In the medium- to long-run, most of the variation in changes in poverty can be attributed to growth in average incomes, suggesting that policies and institutions that promote broad-based growth should be central to the pro-poor growth agenda. Most of the remainder of the variation in changes in poverty 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 relatively little guidance as to the policies and institutions that promote these other sources of pro-poor growth.