Why Has Growth Not Trickled Down to the Poor? A Study of Nigeria

Ademola Obafemi Young

doi:10.5539/res.v11n1p156

Abstract

Despite impressive economic growth and major economic reform policies the search for poverty-reducing growth strategies remains a perennial question in many developing countries as poverty persists unabated. This motivates the current study to investigate empirically growth-poverty nexus in Nigeria spanning between the period 1970 and 2017. The paper attempted to answer the question: why has growth not trickled down to the poor? Time series econometrics were applied to test the cointegrating, short- and long-run dynamics among the variables. The results obtained revealed that growth trickled down to the poor only when high rates of employment growth accompanied high rates of economic growth. In addition to employment, the result also revealed that the form of capital formation, rather than its absolute value, appears to matter to the question of why has growth not trickle down to the poor. Thus, economic growth policies that promote an increase in income in conjunction with a high rates of employment growth are more effective in combating poverty than those that focus only on average income levels.&nbsp;&nbsp;

Highlights

The past three decades have seen the emergence of many African countries, generally exhibiting growth rates much higher than those in the developed countries (Hari & Hatti, 2016; Fosu, 2017a)
The findings indicated that the initial level of economic growth is not prone to poverty reduction, while an increase in economic growth is prone to poverty reduction, a situation that can only be sustained and improved upon if certain policy measures are put in place
In order to avert spuriousness of the result the empirical analysis began with the assessment of the stationarity conditions of the variables employed by applying the Phillips Perron (PP) and Augmented Dickey-Fuller (ADF) unit root tests

Summary

Introduction

The past three decades have seen the emergence of many African countries, generally exhibiting growth rates much higher than those in the developed countries (Hari & Hatti, 2016; Fosu, 2017a). The extent to which the poor benefit from this growth, whether this shift in Africa‘s wealth has lessened poverty, has been a subject of controversy (Shimeles, 2014; Hari & Hatti, 2016). This, in turn, as argued in Nindi & Odhiambo (2015) results in a worsening of the distribution of income, which increases poverty. This strand of literature avers that there are reinforcing factors that maintain poverty amongst the poor and impede them from contributing to growth (Nindi & Odhiambo, 2015). From the point of view of achieving the objective of poverty alleviation, high growth alone is not sufficient, selective intervention will be required

Methods

Results

Conclusion