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Poverty-Growth Links. Applied Inclusive Growth Analytics Kenneth Simler and Roy Katayama (PRMPR) June 30, 2009. Outline. Why look at poverty with growth? Website: “Measuring growth-poverty links” Five tools for measuring poverty-growth relationships Summary. Why look at poverty?.

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Poverty growth links l.jpg

Poverty-Growth Links

Applied Inclusive Growth Analytics

Kenneth Simler and Roy Katayama (PRMPR)

June 30, 2009


Outline l.jpg
Outline

  • Why look at poverty with growth?

  • Website: “Measuring growth-poverty links”

  • Five tools for measuring poverty-growth relationships

  • Summary


Why look at poverty l.jpg
Why look at poverty?

  • General consensus that:

    • Poverty reduction is meaningful goal of development

    • Growth is necessary for sustainable poverty reduction

  • However, the extent to which growth translates into poverty reduction varies across countries.

    • Benefits of growth may not be reaching the poor

    • Distributional changes can offset growth effects


Growth and poverty reduction l.jpg

10

Romania

Zambia

Indonesia

Annual change in poverty headcount (%)

Burkina Faso

-3

6

Bolivia

Senegal

Bangladesh

Brazil

India

Tunisia

Ghana

Uganda

El Salvador

Vietnam

-10

Annual GDP per capita growth, 1990s (%)

Source: Pro Poor Growth in the 1990s. Country Case studies

Growth and poverty reduction


Growth spells and poverty reduction l.jpg
Growth spells and poverty reduction

Source: Bourguignon (2002)


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Poverty-growth-inequality triangle

  • Poverty reduction= f (growth, Δdistribution)

  • What are effects of growth on distribution?

  • What are effects of inequality on rate and pattern of growth?

Source: Bourguignon (2004)


Poverty growth inequality triangle7 l.jpg
Poverty-growth-inequality triangle

Source: Bourguignon (2004)

  • Ex-post analysis of this relationship can:

    • Inform ex-ante analysis of poverty and distributional impacts of policies

    • Help policymakers in evaluating policy options


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Looking beyond averages

  • Inclusive growth analysis requires:

    • Good understanding of growth at the mean,

    • …but also the incidence of growth across the distribution,

    • ... and changes to the distribution and poverty.

  • Review of ESW indicated:

    • Many could have been strengthened by utilizing existing tools on growth-poverty links.


Website measuring the growth poverty link l.jpg

Overview of website and contents

Website: “Measuring the Growth-Poverty Link”


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Useful growth-poverty tools

  • Website: Measuring the Growth-Poverty Link (http://go.worldbank.org/J70VTQSAK0)

  • Purpose: Make tools that explore growth-poverty links more accessible and results easier to understand

  • 5 existing tools to explore growth, distribution, and poverty

    • Growth elasticity of poverty

    • Growth incidence curve

    • Rate of pro-poor growth

    • Growth-Inequality decomposition of poverty

    • Sectoral decomposition of poverty


  • Overview of each tool on website l.jpg
    Overview of each tool on website

    • Definitions and Concepts

    • Limitations and Extensions

    • Quick Results

      • Data requirements

      • Stata/ ADePT options

      • Helpful tips

    • Annotated examples

      • Stata commands

      • Interpretation of results

    • References / Related Papers



    1 growth elasticity of poverty l.jpg
    1. Growth elasticity of poverty

    • Indicates how effectively growth has translated into poverty reduction.

    • Misnomer:

      • Should be GDP elasticity of poverty

    • Initial conditions matter:

      • Location of poverty line (initial poverty levels)

      • Shape of the distribution (initial inequality)



    2 growth incidence curves l.jpg
    2. Growth incidence curves

    • Illustrates growth rate of income (expenditure) for each percentile of a distribution.

    • Gives equal weight to people…rather than to dollars

    • Refers to anonymous percentiles

      • Individual at 10th percentile at t0 is not necessarily same individual at 10th percentile at t1


    Uganda gics l.jpg
    Uganda: GICs

    1992-2002

    2002-2005

    Growth rate in mean =4.09

    Mean percentile growth rate =3.26

    Headcount poverty (1992) =56.43

    Rate of pro-poor growth =2.90

    Growth rate in mean =3.61

    Mean percentile growth rate =4.73

    Headcount poverty (2002) =38.82

    Rate of pro-poor growth =4.44



    3 rate of pro poor growth l.jpg
    3. Rate of pro-poor growth

    • Represents the mean growth rate of the poor

      • Not to be confused with growth rate in the mean of the poor

      • Related to GIC: Area under GIC up to poverty line (also equals the change in the Watts index)

    • General definition:

    <


    4 growth inequality decomposition l.jpg
    4.Growth-inequality decomposition

    Quantifies the relative contribution of economic growth and redistribution to changes in poverty.

    = + +


    Uganda growth inequality decomp l.jpg
    Uganda: Growth-inequality decomp.

    Uganda: 1992-2002

    1992 as reference (base year 1)


    5 sectoral decomposition of poverty l.jpg
    5. Sectoral decomposition of poverty

    • Quantifies relative contributions to changes in aggregate poverty of:

      • changes in poverty within sectors and

      • inter-sectoral population shifts

        = + +

    • Typical sectors for decomposition:

      • Urban/rural

      • Regions

      • Economic sectors




    Summary l.jpg
    Summary

    • Website:Measuring the Growth-Poverty Link (http://go.worldbank.org/J70VTQSAK0)

  • These tools provide an initial look beyond averages at the poverty and distributional impacts of growth.

  • However, integration with growth story is necessary to get a fuller economic picture.


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