When Unstable, Growth Is Less Pro Poor
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.