openness to international trade, raise average incomes with little systematic effect on the distribution of income. This supports the view that a basic policy package of private property rights, fiscal discipline, macroeconomic stability, and openness to trade on average increases the income of the poor to the same extent that it increases the income of the other households in society. It is worth emphasizing that our evidence does not suggest a 'trickle down' process or sequencing in which the rich get richer first and eventually benefits trickle down to the poor. The evidence, to the contrary, is that private property rights, stability, and openness contemporaneously create a good environment for poor households—and everyone else—to increase their production and income. On the other hand, we find little evidence that formal democratic institutions or a large degree of government spending on social services systematically affect incomes of the poor.
Our findings do not imply that growth is all that is needed to improve the lives of the poor. Rather, we simply emphasize that growth on average does benefit the poor as much as anyone else in society, and so standard growth-enhancing policies should be at the centre of any effective poverty reduction strategy. This also does not mean that the potential distributional effects of growth, or the policies that support growth, can or should be ignored. Our results do not imply that the income share of the poorest quintile is immutable—rather, we simply are unable to relate the changes across countries and over time in this income share to average incomes, or to a variety of proxies for policies and institutions that matter for growth and poverty reduction. This may be simply because any effects of these policies on the income share of the poorest quintile are small relative to the very substantial measurement error in the very imperfect available income distribution data we are forced to rely upon. It may also be due to the inability of our simple empirical models to capture the complex interactions between inequality and growth suggested by some theoretical models. In short, existing cross-country evidence—including our own—provides disappointingly little guidance as to what mix of growth-oriented policies might especially benefit the poorest in society. But our evidence does strongly suggest that economic growth and the policies and institutions that support it on average benefit the poorest in society as much as anyone else.