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4 Country Evidence of Growth and Poverty Reduction

Table 1 presents data on evidence of pro-poor growth experiences of the bottom quintile along with growth in average income for a diversity of countries for which data on growth and distribution existed for 10 or more years [1]. The north-west (NW) quadrant shows countries with spells of “growth” that are characterized as anti-poor recessions. Those countries experienced negative growth with deteriorations in income distribution (calculated as the difference in growth rates between per capita income and income of the lowest quintile). Countries in this quadrant were mainly transitional and conflict affected countries. For example, in Sierra Leone, from 1968 to 1989 the income of the lowest quintile fell by 80 % whereas the average income level fell by about 18 %. This compares with Russia where from 1988 to 1998 the income of the lowest quintile fell by 76 % whereas the average income level fell by slightly less than 50 %.

Table 1 Cross country evidence of pro-poor growth

Negative growth inequality rises

Positive growth inequality rises

Anti-poor recession

Years

g

g20

Broadly shared growth

Years

g

g20

Not pro-poor by any definition

Years

g

g20

Poland

20

-0.2

-1.4

Korea, Rep

32

6.7

6.6

Costa Rica

35

1.6

-0.1

Iran, Islamic

15

-0.4

-0.7

Taiwan, China

31

6.3

6.2

Tanzania

27

1.5

-2.1

Republic Slovak

10

-0.4

-0.5

Hong Kong, China

20

5.8

5.2

Bulgaria

10

1.5

-3.5

Republic Niger

32

-0.6

-1.3

Singapore

20

5.4

5.2

Panama

26

1.4

-2.3

Sierra Leone

21

-0.8

-7.7

China

15

5.0

1.6

Nigeria

38

1.2

-0.5

Zambia

37

-1.0

-2.7

Malaysia

25

4.7

4.1

Dominican Republic

20

1.0

-0.2

Estonia

10

-1.7

-6.2

Thailand

36

4.2

3.1

El Salvador

30

0.7

-1.2

Latvia

10

-4.2

-7.4

Mauritius

11

3.7

1.6

Senegal

31

0.2

-0.5

Russian Federation

10

-5.6

14.3

Brazil

33

2.5

0.3

Ethiopia

14

0.2

-1.2

Colombia

31

2.3

2.1

Mexico

38

2.1

0.9

Ecuador

26

1.7

0.3

Philippines

40

1.5

0.5

Chile

24

1.4

1.1

Peru

33

0.4

0.1

Negative growth/inequality falls

Positive growth/inequality falls

Pro-poor recession

Years

g

g20

Pro-poor biased growth

Years

g

g20

Years

g

g20

Guyana

37

-0.4

-0.1

Gabon

15

7.7

9.0

Trinidad & Tobago

31

1.8

2.1

Jordan

17

-0.6

1.0

Indonesia

35

3.7

4.4

India

34

1.8

2.2

Belarus

10

-1.8

-1.1

Tunisia

25

3.4

3.6

Bangladesh

32

1.3

1.5

Medagascar

33

-2.1

-1.7

Egypt, Arab Rep

32

2.8

4.5

Nepal

18

1.2

3.9


Negative growth/inequality falls

Positive growth/inequality falls

Pro-poor recession

Years

g

g20

Pro-poor biased growth

Years

g

g20

Years

g

g20

Ghana

10

2.4

4.3

Jamaica

35

1.1

1.5

Sri Lanka

32

2.3

3.4

Honduras

28

0.5

1.3

Hungary

31

2.2

2.7

Bolivia

22

0.3

1.0

Turkey

26

2.2

2.9

Venezuela, RB

31

0.1

0.1

Pakistan

32

2.2

2.8

Source: Cord et al. (2003) as reported by Page (2006)

The south-west (SW) quadrant includes countries that experienced what was characterized as pro-poor recessions; that is recessions that were accompanied by progressive distributional change. Jordan is the only country in the sample where there is evidence that poverty may have decreased in tandem with economic decline; while average income levels over 1980–1997 declined by 10 %, the income of the lowest quintile increased by 18 %. In Madagascar, the income of the lowest quintile of the population appears to have fallen by 40 % while the average income was halved between 1960 and 1993.

The north-east (NE) quadrant shows a majority of the countries with positive income growth and regressive income redistribution. Those country experiences provide support to the notion that the growth process for many nations has been accompanied by increasing inequality. The data delineated two sub-groups; those cases where growth was broadly shared (consistent with the working definition of pro-poor growth or growth that benefits the poor), and those cases where growth was not pro-poor and could have likely been associated with increased poverty.

The shared growth countries included many of the highly successful East Asian economies that recorded significant growth accompanied largely by some decline in income distribution. For the period for which data was available, the top four countries (Korea, Taiwan, Hong Kong and Singapore) recorded growth rates of per capita income of the lowest quintile at about 5 %; which was less than but close to the rate of per capita income growth for each country. Contrast that with the case of China in which average per capita income growth was 5 % over the 1980–1995 period, but the lowest quintile of the population experienced only about one third the rate of income growth. However, records show that sustained rate of income growth at the bottom of the income distribution sufficiently lifted millions of people out of poverty. Note, however that in the Latin American countries in this group, the per capita income growth rate at the bottom quintile was sufficiently low, recorded at less than 1 % on average, and had no discernible impact on poverty alleviation.

The second group of countries in the NE quadrant is those characterized as not pro-poor by any means, meaning that despite aggregate growth, the income of the poor has fallen. Therefore, poverty may have risen among those countries. For example, for Tanzania, between 1964 and 1991 per capita income increased by

1.5 % per year whereas the income of the poorest quintile fell by 2 %. In Senegal and Ethiopia the differences between the growth of per capita income and the decline in income of the lowest quintile were much lower.

Lastly, the south-east (SE) quadrant shows cases where growth was associated with progressive distributional change. This is the case that meets the strict definition of pro-poor growth and suggests that the relative rate of growth of income of the poor exceeded that of the non-poor. SSA examples in this category are Gabon and Ghana. Looking at the data, it is clear that the median growth rate of income for the poor in the shared growth category (NE quadrant) is higher than that for the pro-poor biased growth category. That implies that the countries where the poor have benefited the most in terms of income growth are in the NE quadrant. The outlier is the case of Gabon where during 1960–1975 the lowest quintile of the population enjoyed growth rates of 9 % per year on average when compared to 7 % per year for the whole population. Therefore, it appears that increased overall income growth that is accompanied by modest declines in income distribution had a greater impact on the welfare of the poor than growth that was biased in their favor, when it took place in a relatively low growth environment.

  • [1] This Table is borrowed from Page (2006). However, the original computation and analysis of the growth rates in per capita income and in the income of the lowest quintile for all the countries are from Cord et al. (2003) based on the Dollar and Kraay (2002) data set. It excludes data from developed countries
 
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