Pro-Poor Growth: What is It and How is It Important?

Date: June 2003
Type: Papers and Briefs
Subject:
Series: ERD Policy Briefs
ISSN: 1655-5260 (print)

Description

Asia's experience strongly suggests that rapid and sustained economic growth leads to significant poverty reduction. This seems consistent with the analysis of global cross-national data showing that the incomes of the poor move proportionately one-forone with overall average incomes (Dollar and Kraay 2001). From a policy standpoint, an implication might be that poverty reduction requires nothing more than simply promoting rapid growth. However, because Asia is so vast and diverse, its success story does not apply equally to all countries, nor can the results of crossnational regressions be taken at face value. The relationship between growth and poverty is highly country-specific, as exemplified by the analyses of subnational data for individual countries (Pernia 2001).

These indicate that the poor typically gain less than proportionately from increases in overall average incomes, and that other factors (initial conditions and institutions) matter to poverty reduction besides their impact on growth itself. In India, literacy, higher initial rural-tourban income levels, and other state-specific attributes, by influencing distribution, contribute importantly to poverty reduction (Ravallion and Datt 2002). In Indonesia, infrastructure, human capital investment, agricultural terms of trade, and access to technology directly benefit the poor by redressing inequality (Balisacan, Pernia, and Asra 2003). Similar results obtain for the Philippines, Thailand and Viet Nam.

Contents

  • What is Pro-poor Growth?
  • Measuring Pro-poor Growth
  • What Policies Promote Pro-poor Growth?
  • Conclusion
  • References