Poverty levels in the developing world have been declining steadily over the 1990s (World Bank 2000a , 2001). However, this progress has been very unequally distributed. Some regions and groups of countries have made rapid progress, while poverty levels in others, particularly in the least developed countries (LDCs) have been stagnant or rising. Economic growth performance is one factor explaining these differences, but there may also be fundamental differences in the efficiency with which growth and distribution reduce poverty in different groups of countries.
This study has two main objectives. First, it explores whether there is a systematic relationship between the level of development, as proxied by the level of consumption per capita, and the income and inequality elasticities of poverty. Specifically, it looks at whether changes in consumption levels and distribution have different effects on poverty in LDCs compared to other low-income and middle-income countries.
Second, it examines whether different methods of estimation significantly affect the results. Poverty elasticities have often varied greatly across existing studies. The difference could be due to one or both of two factors: systematic differences between estimation methods, or differences resulting from using different data. This chapter tries to shed some light on this by using the same data set for all three methodologies.
The structure of the chapter is as follows. Section 2 reviews some of the recent literature on the interaction between consumption, inequality and poverty. Three different methodologies are introduced and their results discussed in Section 3. Section 4 then uses the results in a set of simulations to demonstrate their likely effects for poverty levels until 2015. Section 5 concludes with a summary of the main points, and implications for policy and further research.