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Growth Still is Good for the Poor
TL;DR: The authors found that the change in the share of income of the poorest two quintiles in a global dataset spanning 118 countries over the past four decades is small and uncorrelated with changes in average income, implying that the latter accounts for most of the variation in income growth in the poorest quintiles.
Abstract: Incomes in the poorest two quintiles on average increase at the same rate as overall average incomes. This is because, in a global dataset spanning 118 countries over the past four decades, changes in the share of income of the poorest quintiles are generally small and uncorrelated with changes in average income. The variation in changes in quintile shares is also small relative to the variation in growth in average incomes, implying that the latter accounts for most of the variation in income growth in the poorest quintiles. These findings hold across most regions and time periods and when conditioning on a variety of country-level factors that may matter for growth and inequality changes. This evidence confirms the central importance of economic growth for poverty reduction and illustrates the difficulty of identifying specific macroeconomic policies that are significantly associated with the relative growth rates of those in the poorest quintiles.
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17 Feb 2014
TL;DR: In this paper, the authors show that from the perspective of the best available macroeconomic data, there is not a lot of evidence that redistribution has in fact undercut economic growth (except in extreme cases).
Abstract: The Fund has recognized in recent years that one cannot separate issues of economic growth and stability on one hand and equality on the other. Indeed, there is a strong case for considering inequality and an inability to sustain economic growth as two sides of the same coin. Central to the Fund’s mandate is providing advice that will enable members’ economies to grow on a sustained basis. But the Fund has rightly been cautious about recommending the use of redistributive policies given that such policies may themselves undercut economic efficiency and the prospects for sustained growth (the so-called “leaky bucket” hypothesis written about by the famous Yale economist Arthur Okun in the 1970s). This SDN follows up the previous SDN on inequality and growth by focusing on the role of redistribution. It finds that, from the perspective of the best available macroeconomic data, there is not a lot of evidence that redistribution has in fact undercut economic growth (except in extreme cases). One should be careful not to assume therefore—as Okun and others have—that there is a big tradeoff between redistribution and growth. The best available macroeconomic data do not support such a conclusion.
816 citations
Book•
23 Nov 2015
TL;DR: In this article, the authors provide guidance on how to design climate policies so they contribute to poverty reduction, and how to designing poverty reduction policies that contribute to climate change mitigation and resilience building, and explore how they can more easily be achieved if considered together.
Abstract: Climate change threatens the objective of eradicating poverty. Poor people and poor countries are already vulnerable to all types of climate-related shocks—natural disasters that destroy assets and livelihoods; water borne diseases and pests that becomemore prevalent during heat waves, floods, or droughts; crop failure from reduced rainfall; andspikes in food prices that follow extreme weather events. Such shocks can erase decades ofhard work and leave people with irreversible human and physical losses. Changes in climateconditions caused by increasing concentrations of greenhouse gases in the atmosphere will worsen these shocks and slow down poverty reduction. The good news is that, at least until 2030, “good development” can prevent most of these impacts. By “good development,” we mean development that is rapid, inclusive, and climate informed; includes strong social safety nets and universal health coverage; and iscomplemented with targeted adaptation interventions such as heat-tolerant crops and early warning systems. Absent such good development, many people will still be living in or closeto extreme poverty in 2030, with few resources to cope with climate shocks and adapt to longterm trends, and climate change could increase extreme poverty by more than 100 million people by 2030. In the longer run, beyond 2030, our ability to adapt to unabated climate change is limited. To keep the longer-term impacts on poverty in check, immediate emissions-reduction policiesare needed that bring emissions to zero by the end of the 21st century. These policies neednot threaten short-term progress on poverty reduction—provided they are well designed andinternational support is available for poor countries.Ending poverty and stabilizing climate change will be unprecedented global achievements.But neither can be attained without the other: they need to be designed and implementedas an integrated strategy. Shock Waves: Managing the Impacts of Climate Change on Poverty brings together those two objectives and explores how they can more easily be achieved if considered together. The book provides guidance on how to design climate policies so they contribute to poverty reduction, and on how to design poverty reduction policies so they contribute to climate change mitigation and resilience building.
468 citations
TL;DR: The authors assesses impacts at household level to determine effects on poverty and the poor and shows how rapid development could reduce these impacts, highlighting how rapid and inclusive development can reduce the future impact of climate change on poverty.
Abstract: The economic impact of climate change has typically been considered at regional or national levels. This Perspective assesses impacts at household level to determine effects on poverty and the poor. It shows how rapid development could reduce these impacts. Analysis of the economic impact of climate change typically considers regional or national economies and assesses its impact on macroeconomic aggregates such as gross domestic product. These studies therefore do not investigate the distributional impacts of climate change within countries or the impacts on poverty. This Perspective aims to close this gap and provide an assessment of climate change impacts at the household level to investigate the consequences of climate change for poverty and for poor people. It does so by combining assessments of the physical impacts of climate change in various sectors with household surveys. In particular, it highlights how rapid and inclusive development can reduce the future impact of climate change on poverty.
239 citations
TL;DR: In this article, the authors proposed a new quality of growth index for developing countries, which encompasses both the intrinsic nature and social dimensions of growth, and is computed for over 90 countries for the period 1990-2011.
Abstract: This paper proposes a new quality of growth index for developing countries. The index encompasses both the intrinsic nature and social dimensions of growth, and is computed for over 90 countries for the period 1990–2011. The approach is premised on the fact that not all growth is created equal in terms of social outcomes, and that it does matter how one reaches from one level of income to another for various theoretical and empirical reasons. The paper finds that the quality of growth has been improving in the vast majority of developing countries over the past two decades, although the rate of convergence is relatively slow. At the same time, there are considerable cross-country variations across income levels and regions. Finally, empirical investigations point to the fact that main factors of the quality of growth are political stability, public pro-poor spending, macroeconomic stability, financial development, institutional quality and external factors such as FDI.
183 citations
Cites background from "Growth Still is Good for the Poor"
...The strength of growth is an important aspect of the quality of growth since high growth is a necessary ingredient to put a dent to poverty (Dollar and Kraay, 2002; Dollar et al., 2013)....
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...…former is more in line with the concept of pro-poor growth which underlies the concept of quality of growth.4 The strength of growth is an important aspect of the quality of growth since high growth is a necessary ingredient to put a dent to poverty (Dollar and Kraay, 2002; Dollar et al., 2013)....
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...However, relatively few posted significant declines in poverty, inequality and unemployment (see Dollar and Kraay, 2002; Dollar et al., 2013)....
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01 Jan 2015
TL;DR: In this paper, the progress made on sustainable poverty reduction and shared prosperity, as well as the policies that are needed to make further progress, are discussed, along with the unfinished agenda left for the SDGs.
Abstract: Chapter one examines the progress made on sustainable poverty reduction and shared prosperity, as well as the policies that are needed to make further progress. With 2015 being a watershed year for global development goals, Chapter two reviews the development successes during the MDG period and examines the unfinished agenda left for the SDGs. Chapter three assesses the macroeconomic performance over the MDG period, provides the near- and medium-term outlook, and examines what the world might be like in 2030. Part two, the thematic part, examines how demographic change can be tilted in favor of the development goals. Chapter four characterizes demographic change at the global, regional, and country level. It also examines the drivers of demographic change that have shaped the diversity of demographic patterns and trends. Chapter five examines how demography affects development. It develops a new global typology that ties demographic change to development potential and analyzes the various pathways through which demographic change affects the prosperity of nations. Chapter six analyzes how policies can leverage demographic change in support of the development goals. It examines policy opportunities at both the country and the global level.
155 citations
References
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Posted Content•
TL;DR: Dollar and Kraay as mentioned in this paper found that the share of income accruing to the bottom quintile does not vary systematically with the average income, and that when average incomes rise, the average incomes of the poorest fifth of society rise proportionately.
Abstract: When average incomes rise, the average incomes of the poorest fifth of society rise proportionately. This holds across regions, periods, income levels, and growth rates. But relatively little is known about the broad forces that account for the variations across countries and across time in the share of income accruing to the poorest fifth. When average incomes rise, the average incomes of the poorest fifth of society rise proportionately. This is a consequence of the strong empirical regularity that the share of income accruing to the bottom quintile does not vary systematically with average income. Dollar and Kraay document this empirical regularity in a sample of 92 countries spanning the past four decades and show that it holds across regions, periods, income levels, and growth rates. Dollar and Kraay next ask whether the factors that explain cross-country differences in the growth rates of average incomes have differential effects on the poorest fifth of society. They find that several determinants of growth - such as good rule of law, openness to international trade, and developed financial markets - have little systematic effect on the share of income that accrues to the bottom quintile. Consequently, these factors benefit the poorest fifth of society as much as everyone else. There is some weak evidence that stabilization from high inflation and reductions in the overall size of government not only increase growth but also increase the income share of the poorest fifth in society. Finally, Dollar and Kraay examine several factors commonly thought to disproportionately benefit the poorest in society, but find little evidence of their effects. The absence of robust findings emphasizes that relatively little is known about the broad forces that account for the cross-country and intertemporal variation in the share of income accruing to the poorest fifth of society. This paper - a product of Macroeconomics and Growth, Development Research Group - is part of a larger effort in the group to study growth and poverty reduction. The authors may be contacted at ddollar@worldbank.org or akraay@worldbank.org.
3,407 citations
Posted Content•
TL;DR: In this article, a new data set on inequality in the distribution of income is presented, and the authors explain the criteria they applied in selecting data on Gini coefficients and on individual quintile groups' income shares.
Abstract: This article presents a new data set on inequality in the distribution of income. The authors explain the criteria they applied in selecting data on Gini coefficients and on individual quintile groups' income shares. Comparison of the new data set with existing compilations reveals that the data assembled here represent an improvement in quality and a significant expansion in coverage, although differences in the definition of the underlying data might still affect intertemporal and international comparability. Based on this new data set, the authors do not find a systematic link between growth and changes in aggregate inequality. They do find a strong positive relationship between growth and reduction of poverty.
2,637 citations
Posted Content•
TL;DR: In this article, the authors examined the robustness of explanatory variables in cross-country economic growth regressions and employed a novel approach, Bayesian Averaging of Classical Estimates (BACE), which constructs estimates as a weighted average of OLS estimates for every possible combination of included variables.
Abstract: This paper examines the robustness of explanatory variables in cross-country economic growth regressions. It employs a novel approach, Bayesian Averaging of Classical Estimates (BACE), which constructs estimates as a weighted average of OLS estimates for every possible combination of included variables. The weights applied to individual regressions are justified on Bayesian grounds in a way similar to the well-known Schwarz criterion. Of 32 explanatory variables we find 11 to be robustly partially correlated with long-term growth and another five variables to be marginally related. Of all the variables considered, the strongest evidence is for the initial level of real GDP per capita.
1,953 citations
"Growth Still is Good for the Poor" refers background in this paper
...1 See World Bank (2013). 2 As an example of this, in a recent speech at Knox College in Galesburg, Illinois on July 24, 2013, President Barack Obama described the US economy as “....
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...Our main findings in that paper were that (i) incomes in the poorest quintile on average increase equiproportionately with average incomes, reflecting the lack of a systematic correlation between growth and changes in the first quintile share, and (ii) this relationship is very strong, reflecting the fact that most of the variation in growth in incomes in the poorest quintile 1 See World Bank (2013)....
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TL;DR: A new data set on national poverty lines is combined with new price data and almost 700 household surveys to estimate absolute poverty measures for the developing world as discussed by the authors, finding that 25% of the population lived in poverty in 2005.
Abstract: A new data set on national poverty lines is combined with new price data and almost 700 household surveys to estimate absolute poverty measures for the developing world We find that 25% of the population lived in poverty in 2005, as judged by what “poverty” typically means in the world's poorest countries This is higher than past estimates Substantial overall progress is still indicated—the corresponding poverty rate was 52% in 1981—but progress was very uneven across regions The trends over time and regional profile are robust to various changes in methodology, though precise counts are more sensitive
1,352 citations
TL;DR: This paper examined the role of secondary data sets in empirical economic research, taking the field of income distribution as a case study, and illustrated problems faced by users of "secondary" statistics, showing how both cross-country comparisons and time-series analysis can depend sensitively on the choice of data.
Abstract: This paper examines the role of secondary data-sets in empirical economic research, taking the field of income distribution as a case study. We illustrate problems faced by users of "secondary" statistics, showing how both cross-country comparisons and time-series analysis can depend sensitively on the choice of data. After describing the genealogy of secondary data-sets on income inequality, we consider the main methodological issues and discuss their implications for comparisons of income inequality across OECD countries and over time. The lessons to be drawn for the construction and use of secondary data-sets are summarized at the end of the paper.
815 citations