Accelerating Poverty Reduction in a Less Poor World : The Roles of Growth and Inequality

This paper re-examines the roles of changes in income and inequality in poverty reduction. The study provides estimates of the relative effects of inequality reduction versus growth promotion in reducing poverty for countries with different levels...

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Bibliographic Details
Main Authors:	Olinto, Pedro, Lara Ibarra, Gabriel, Saavedra-Chanduvi, Jaime
Format:	Policy Research Working Paper
Language:	English en_US
Published:	World Bank, Washington, DC 2014
Subjects:	ABSOLUTE TERMS ABSOLUTE VALUE AVERAGE INCOME AVERAGE INCOMES CHANGES IN POVERTY COUNTRY CHARACTERISTICS COUNTRY EFFECTS COUNTRY SPECIFIC COUNTRY-SPECIFIC EFFECTS DATA AVAILABILITY DATA SET DEPENDENT VARIABLE DEVELOPING COUNTRIES DEVELOPING WORLD DEVELOPMENT ECONOMICS DEVELOPMENT POLICY DEVELOPMENT REPORT DROP IN POVERTY ECONOMETRIC MODEL ECONOMIC DEVELOPMENT ECONOMIC GROWTH ECONOMIC REVIEW ECONOMIC STUDIES EMPIRICAL ESTIMATES EMPIRICAL MODEL EMPLOYMENT EQUATIONS ENDOGENOUS VARIABLES EXPLANATORY POWER FIXED EFFECTS FIXED EFFECTS ESTIMATION GINI COEFFICIENT GINI INDEX GROSS INCOME GROWTH ELASTICITY GROWTH PRO-POOR GROWTH RATE GROWTH THEORY HEADCOUNT POVERTY HIGHER INEQUALITY HOUSEHOLD SURVEYS IMPACT ON POVERTY REDUCTION INCOME DISTRIBUTION INCOME ELASTICITY INCOME GROWTH INCOME INEQUALITY INCOME SHARE INCREASED INEQUALITY INCREASING FUNCTION INCREASING GROWTH INEQUALITY CHANGES INEQUALITY ELASTICITIES INEQUALITY ELASTICITY INEQUALITY MEASURES INEQUALITY REDUCTION LAGGED DEPENDENT LAGGED VALUES LINEAR MODEL LOG NORMAL LOG-NORMALITY ASSUMPTION LOW POVERTY RATES MACROECONOMIC PERFORMANCE MARGINAL COST MARGINAL COSTS MARKET ECONOMIES MEAN INCOME MEDIAN POVERTY NATURAL RESOURCES NEGATIVE EFFECT NEGATIVE RELATIONSHIP NET INCOME 0 HYPOTHESIS OBSERVED POVERTY REDUCTION OBSERVED VALUE POLICY DESIGN POLICY DISCUSSIONS POLICY IMPLICATIONS POLICY RESEARCH POVERTY CHANGES POVERTY DECLINES POVERTY GAP POVERTY GROWTH POVERTY LEVELS POVERTY LINE POVERTY LINES POVERTY MEASURES POVERTY RATE POVERTY RATES POVERTY REDUCTION POWER PARITY PRO-POOR GROWTH RANDOM EFFECTS REAL INCOME REDUCING INEQUALITY REDUCING POVERTY RELATIVE IMPORTANCE RISING INEQUALITY RURAL AREAS SIGNIFICANT EFFECT SIGNIFICANT NEGATIVE STANDARD DEVIATION TRANSITION COUNTRIES
Online Access:	http://documents.worldbank.org/curated/en/2014/05/19457702/accelerating-poverty-reduction-less-poor-world-roles-growth-inequality http://hdl.handle.net/10986/18347

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Summary:	This paper re-examines the roles of changes in income and inequality in poverty reduction. The study provides estimates of the relative effects of inequality reduction versus growth promotion in reducing poverty for countries with different levels of initial poverty. The analysis uses country panel-data for 1980-2010. The results indicate that, as countries become less poor, inequality-reducing policies are likely to become relatively more effective for poverty reduction than growth-promoting policies. The results indicate that the growth elasticity of poverty reduction either increases or remains constant with the level of initial poverty. Nevertheless, the results also strongly indicate that, as poverty declines, the inequality elasticity of poverty reduction increases faster. Therefore, if the marginal cost of reducing inequality relative to the marginal cost of increasing growth does not increase with lower poverty levels, to accelerate poverty reduction, greater emphasis should be given to equity rather than growth as countries attain higher levels of development.

Accelerating Poverty Reduction in a Less Poor World : The Roles of Growth and Inequality

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