Growth, Inequality, and Poverty: Prospects for Pro-Poor Economic Development

By Anthony Shorrocks; Rolph Van Der Hoeven | Go to book overview

reduction, on the other. But there may also be win-win situations, where a policy for equity has a beneficial effect on growth. Typically, those policies have built up the assets of the poor, and helped increase the demand for those assets. This has meant, for example, expansion of education (building up assets), and measures that increase the relative prices of agricultural commodities and the wages of unskilled labour (increasing demand). Along with measures to secure long-term growth of the incomes of the poor, there should also be transfer schemes that help households to cope with risk, which is high for many poor groups. One should try to create schemes that can reduce risk without having high costs in terms of reduced growth.

The main point must still be that, without growth in per capita incomes, poverty will persist in poor countries. Governments intent on poverty reduction must, therefore, create an environment that is conducive to growth. This means microeconomic policy aimed at creating well-functioning markets, macroeconomic policy aimed at stability, and openness towards the rest of the world. Government has to take responsibility for building up human capital via education, and for the creation of a growth enhancing social infrastructure. For all these efforts to be effective, the government must develop good institutions, and provide good governance. The way in which the interaction between civil society and the government is played out will have major implications for the growth outcome. Understanding the nature of domestic politics is, thus, a key to successful economic reform. Something that frequently appears in analyses of the Asian success stories is the notion of 'shared growth', which suggests that, in order to participate actively, the mass of the population must see the benefits of growth. However, it is not only the average person who must be included, but the ruling elite must also allow competing groups to progress, as well as allowing new competitors to enter the political arena. For shared growth to come about, there is need for a bureaucracy of high quality, which is sufficiently insulated from the various pressure groups. This has not as yet appeared in most of Africa.

Poverty can be reduced if there is sufficient economic growth. Growth can be substantial if the policy and institutional environment is right. The low growth rates that characterize Africa are not inevitable. But some aspects of the environment are hard to change, and some politicians may be unwilling to change them. It is, therefore, largely in the social and political arenas that poverty reduction results will be determined.


REFERENCES

Agenor, P.-R. (2002). 'Macroeconomic Adjustment and the Poor: Analytical Issues and Cross-Country Evidence'. Policy Research Working Papers 2788 The World Bank, Washington.

Aghion, P., Caroli, E., and Garcia-Penalosa, C. (1999). 'Inequality and Economic Growth: The Perspectives of the New Growth Theories'. Journal of Economic Literature, 37(4), 1615-60.

Alesina, A. and Perotti, R. (1996). 'Income Distribution, Political Instability and Investment'. European Economic Review, 40(6), 1203-28.

—— and Rodrik, D. (1994). 'Distributive Politics and Economic Growth'. Quarterly Journal of Economics, 109, 465-90.

Ali, A. A. G. (1996). 'Structural Adjustment Programmes and Poverty in Sub-Saharan Africa: 1985-1995'. CODESRIA, Dakar.

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Growth, Inequality, and Poverty: Prospects for Pro-Poor Economic Development
Table of contents

Table of contents

  • Unu World Institute for Development Economics Research (Unu/Wider) ii
  • Growth, Inequality, and Poverty iii
  • Contents v
  • List of Figures vii
  • List of Tables ix
  • List of Acronyms and Abbreviations xi
  • List of Contributors xiii
  • Acknowledgements xvi
  • Introduction 1
  • References 12
  • 1: Economic Policy, Distribution, and Poverty 13
  • References 28
  • Appendix 57
  • References 59
  • 3: Growth, Inequality, and Poverty 62
  • 4: The Growth Elasticity of Poverty 81
  • Appendix 102
  • References 105
  • 6: Growth, Distribution, and Poverty Reduction 107
  • References 123
  • Appendix: Method and Sources 149
  • References 151
  • References 175
  • 9: Twin Peaks 176
  • 9.6 Conclusion 194
  • 10: A Decomposition of Inequality and Poverty Changes in the Context of Macroeconomic Adjustment 197
  • References 220
  • References 249
  • References 271
  • Index 277
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