Measuring the Pro-Poorness of Income Growth within an Elasticity Framework
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World Bank, Washington, DC
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Poverty reduction has become a fundamental objective of development, and therefore a metric for assessing the effectiveness of various interventions. Economic growth can be a powerful instrument of income poverty reduction. This creates a need for meaningful ways of assessing the poverty impact of growth. This paper follows the elasticity approach to propose a measure of pro-poorness defined as a weighted average of the deviation of a growth pattern from the benchmark case. The measure can help assess pro-poorness both in terms of aggregate poverty measures, which are members of the additively separable class, and at percentiles. It also lends itself to a decomposition procedure, whereby the overall pattern of income growth can be unbundled, and the contributions of income components to overall pro-poorness identified. An application to data for Indonesia in the 1990s reveals that the amount of poverty reduction achieved over that period remains far below what would have been achieved under distributional neutrality. This conclusion is robust to the choice of a poverty measure among members of the additively separable class, and can be tracked back to changes in expenditure components.
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ABSOLUTE POVERTY, ABSOLUTE POVERTY LINE, ABSOLUTE REDUCTION, ABSOLUTE VALUE, ADJUSTMENT PERIOD, AGGREGATE GROWTH, AGGREGATE INCOME, AGGREGATE MEASURE, AGGREGATE POVERTY, CONSUMER PRICE INDEX, COUNTERFACTUAL, DENSITY FUNCTION, DEVELOPING WORLD, DEVELOPMENT GOALS, DEVELOPMENT POLICY, DISTRIBUTION FUNCTION, DISTRIBUTIONAL CHANGES, DISTRIBUTIONAL COMPONENT, DISTRIBUTIONAL EFFECT, DISTRIBUTIONAL IMPACT, ECONOMIC GROWTH, EMPIRICAL SECTION, EQUIPROPORTIONATE INCOME, EXTERNAL SHOCKS, FINANCIAL CRISIS, GLOBAL POVERTY, GROWTH, GROWTH ELASTICITY, GROWTH PATTERN, GROWTH PROCESS, GROWTH RATE, GROWTH RATES, HEAD COUNT RATIO, HEADCOUNT POVERTY, HEADCOUNT RATIO, HOUSEHOLD SURVEYS, INCIDENCE OF POVERTY, INCOME, INCOME CHANGE, INCOME COMPONENTS, INCOME DISTRIBUTION, INCOME GROWTH, INCOME LEVEL, INCOME POVERTY, INDIVIDUAL INCOMES, INEQUALITY, INTEREST RATES, INTERNATIONAL COMMUNITY, LEVEL OF POVERTY, MACROECONOMIC STABILITY, MAXIMUM INCOME, MEAN GROWTH, MEAN INCOME, MILLENNIUM DEVELOPMENT GOALS, NEGATIVE IMPACT, NON-INCOME DIMENSIONS, OBSERVED CHANGE, OBSERVED CHANGES, OBSERVED GROWTH, OBSERVED GROWTH RATE, OBSERVED POVERTY REDUCTION, PENSIONS, PER CAPITA EXPENDITURE, PER CAPITA INCOME, POLICY RESEARCH, POLICY RESEARCH WORKING PAPER, POOR POPULATION, POPULATION GROWTH, POPULATION SIZE, POSITIVE GROWTH, POVERTY, POVERTY ANALYSIS, POVERTY GAP INDEX, POVERTY IMPACT, POVERTY IMPACT OF GROWTH, POVERTY INCIDENCE, POVERTY INCREASES, POVERTY INDEX, POVERTY INDICES, POVERTY LINE, POVERTY MEASURE, POVERTY MEASURES, POVERTY OUTCOMES, POVERTY REDUCTION, POVERTY-REDUCING GROWTH, PRO-POOR, PRO-POOR GROWTH, PROGRESS, PURCHASING POWER, PURCHASING POWER PARITY, RATE OF GROWTH, REDUCED POVERTY, REDUCTION IN POVERTY, RELATIVE GAINS, RESPECT, RICHER COUNTRIES, SIGNIFICANT REDUCTION, SQUARED POVERTY GAP, UNEMPLOYMENT, VULNERABILITY, WELFARE LEVEL