Growth, inequality, and poverty reduction in developing countries: Recent global evidence

Augustin Kwasi Fosu*

*Corresponding author for this work

Research output: Contribution to journalArticleScientificpeer-review

64 Citations (Scopus)

Abstract

The study presents comparative global evidence on the transformation of economic growth to poverty reduction in developing countries, with emphasis on the role of income inequality. The focus is on the period since the early-mid-1990s when growth in these countries as a group has been relatively strong, surpassing that of the advanced economies. Both regional and country-specific data are analyzed for the $1.25 and $2.50-level poverty headcount ratios using World Bank Povcalnet data. The study finds that . on average income growth has been the major driving force behind both the declines and increases in poverty. The study, however, documents substantial regional and country differences that are masked by this 'average' dominant-growth story. While in the majority of countries, growth was the major factor behind falling or increasing poverty, inequality, nevertheless, played the crucial role in poverty behavior in a large number of countries. And, even in those countries where growth has been the main driver of poverty-reduction, further progress could have occurred under relatively favorable income distribution. For more efficient policymaking, therefore, idiosyncratic attributes of countries should be emphasized. In general, high initial levels of inequality limit the effectiveness of growth in reducing poverty while growing inequality increases poverty directly for a given level of growth. It would seem judicious, therefore, to accord special attention to reducing inequality in certain countries where income distribution is especially unfavorable. Unfortunately, the present study also points to the limited effects of growth and inequality-reducing policies in low-income countries.

Original languageEnglish
Pages (from-to)306–336
Number of pages31
JournalResearch in Economics
Volume71
Issue number2
Early online date16 Apr 2016
DOIs
Publication statusPublished - 2017
MoE publication typeA1 Journal article-refereed

Keywords

  • Developing countries
  • Growth
  • Inequality
  • Poverty

Fingerprint

Dive into the research topics of 'Growth, inequality, and poverty reduction in developing countries: Recent global evidence'. Together they form a unique fingerprint.

Cite this