Growth, Inequality, and Poverty : A Robust Relationship?
An extensive literature on poverty traps suggests that high levels of poverty deter growth. However, a seemingly basic implication of the underlying theoretical models, namely that countries suffering from higher levels of poverty should grow less...
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World Bank, Washington, DC
2018
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| Online Access: | http://documents.worldbank.org/curated/en/248621536264773958/Growth-Inequality-and-Poverty-A-Robust-Relationship http://hdl.handle.net/10986/30422 |
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okr-10986-304222021-06-08T14:42:47Z Growth, Inequality, and Poverty : A Robust Relationship? Marrero, Gustavo A. Serven, Luis GROWTH INEQUALITY POVERTY POVERTY TRAP An extensive literature on poverty traps suggests that high levels of poverty deter growth. However, a seemingly basic implication of the underlying theoretical models, namely that countries suffering from higher levels of poverty should grow less rapidly, has remained untested. A parallel literature has suggested a variety of mechanisms through which inequality may affect growth in opposing directions. Because inequality and poverty are different aspects of the income distribution, inequality can also affect growth through poverty, an indirect channel that has not been explicitly analyzed. This paper contributes to fill both gaps. Using a large cross-country panel data set, it estimates a reduced-form growth equation adding both inequality and poverty to an otherwise standard set of growth determinants. Given inequality, the correlation of growth with poverty is consistently negative. In contrast, given poverty, the correlation of growth with inequality can be positive or negative, depending on the empirical specification and econometric approach used. Yet, the indirect effect of inequality on growth through its correlation with poverty is robustly negative. Closer inspection shows that these results are driven by the sample observations featuring high (but not extremely high) poverty rates. These empirical findings are consistent with the predictions from an analytical framework with learning-by-doing and knowledge spillovers, in which consumers cannot save and invest if their initial endowment is below a minimum consumption level. 2018-09-13T21:16:01Z 2018-09-13T21:16:01Z 2018-09 Working Paper http://documents.worldbank.org/curated/en/248621536264773958/Growth-Inequality-and-Poverty-A-Robust-Relationship http://hdl.handle.net/10986/30422 English Policy Research Working Paper;No. 8578 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank World Bank, Washington, DC Publications & Research Publications & Research :: Policy Research Working Paper |
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Digital Repository |
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Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English |
| topic |
GROWTH INEQUALITY POVERTY POVERTY TRAP |
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GROWTH INEQUALITY POVERTY POVERTY TRAP Marrero, Gustavo A. Serven, Luis Growth, Inequality, and Poverty : A Robust Relationship? |
| relation |
Policy Research Working Paper;No. 8578 |
| description |
An extensive literature on poverty traps
suggests that high levels of poverty deter growth. However,
a seemingly basic implication of the underlying theoretical
models, namely that countries suffering from higher levels
of poverty should grow less rapidly, has remained untested.
A parallel literature has suggested a variety of mechanisms
through which inequality may affect growth in opposing
directions. Because inequality and poverty are different
aspects of the income distribution, inequality can also
affect growth through poverty, an indirect channel that has
not been explicitly analyzed. This paper contributes to fill
both gaps. Using a large cross-country panel data set, it
estimates a reduced-form growth equation adding both
inequality and poverty to an otherwise standard set of
growth determinants. Given inequality, the correlation of
growth with poverty is consistently negative. In contrast,
given poverty, the correlation of growth with inequality can
be positive or negative, depending on the empirical
specification and econometric approach used. Yet, the
indirect effect of inequality on growth through its
correlation with poverty is robustly negative. Closer
inspection shows that these results are driven by the sample
observations featuring high (but not extremely high) poverty
rates. These empirical findings are consistent with the
predictions from an analytical framework with
learning-by-doing and knowledge spillovers, in which
consumers cannot save and invest if their initial endowment
is below a minimum consumption level. |
| format |
Working Paper |
| author |
Marrero, Gustavo A. Serven, Luis |
| author_facet |
Marrero, Gustavo A. Serven, Luis |
| author_sort |
Marrero, Gustavo A. |
| title |
Growth, Inequality, and Poverty : A Robust Relationship? |
| title_short |
Growth, Inequality, and Poverty : A Robust Relationship? |
| title_full |
Growth, Inequality, and Poverty : A Robust Relationship? |
| title_fullStr |
Growth, Inequality, and Poverty : A Robust Relationship? |
| title_full_unstemmed |
Growth, Inequality, and Poverty : A Robust Relationship? |
| title_sort |
growth, inequality, and poverty : a robust relationship? |
| publisher |
World Bank, Washington, DC |
| publishDate |
2018 |
| url |
http://documents.worldbank.org/curated/en/248621536264773958/Growth-Inequality-and-Poverty-A-Robust-Relationship http://hdl.handle.net/10986/30422 |
| _version_ |
1764471962484080640 |