Business Intelligence

When Unstable, Growth Is Less Pro Poor

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Executive Summary

Macroeconomic instability has been increasingly considered as a factor lowering average income growth and by this way is a factor slowing down poverty reduction. But it can also result in slower poverty reduction for a given average rate of growth, due to poverty traps, often examined at the microeconomic level. Testing a model of poverty change on a panel of data for 70 countries from 1981 to 1999, the authors do find that income instability results in a lower poverty reduction for a given growth. It reflects a distributional effect not fully captured by a change in the Gini coefficient.

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