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Analysing and achieving pro-poor growth

Poverty in Focus
International Poverty Centre

United Nations Development Programme (UNDP)

March 2007

SARPN acknowledges the UNDP as a source of this document:
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Global Estimates of Pro-Poor Growth
by Hyun H. Son,
International Poverty Centre

The economic growth performance of developing countries differs a lot, both over time and across countries. There are large variations not only in growth rates but also in the impact on poverty per unit of growth–the elasticity of poverty with respect to mean growth of income or consumption. This article is intended to illuminate the empirical interrelation between growth performance, poverty reduction and changes in inequality.

A recent Working Paper from the International Poverty Centre, IPC, presents global estimates of growth and its pro-poorness on the basis of crosscountry analysis of 237 growth spells in 80 low- and middle-income developing countries during the period 1984-2001, spanning two successive household surveys for a given country.

The study defined growth as pro-poor if poor households increase income (or consumption, which ever measure is available for a given country) proportionally more than the non-poor, i.e. households above the poverty line. When growth is negative, i.e. in a recession, it is called pro-poor if the income decrease is proportionally less, on average, for poor households than for the non-poor ones.

Further, a new measure of pro-poor growth was defined in order to adjust the observed mean growth rates of income (or consumption) for distributional changes. Thus, if inequality increases over a period, then the pro-poor growth rate will be lower than the observed growth rate of the mean income or consumption, and vice versa. This new measure of pro-poor growth captures gains and losses in the income (or consumption) of the poor, relative to the observed average growth rates, due to changes in inequality. The gains imply pro-poor growth, the losses anti-poor growth.

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