Business Intelligence

Income Distribution And Growth's Ability To Reduce Poverty

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Executive Summary

The present paper examines the degree to which income distribution affects the ability of economic growth to reduce poverty, based on 1990s data for a sample of rural and urban sectors of African economies. Using the basic needs approach, an analysis-of-covariance model is derived and estimated, with the headcount, gap and squared gap poverty ratios serving as the respective dependent variables and the Gini coefficient and PPP-adjusted incomes as explanatory variables. The paper finds that the responsiveness of poverty to income growth is a decreasing function of inequality, albeit at varying rates for the three poverty measures: lowest for the headcount, followed by the gap and fastest for the squared gap.

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