A perennial question in development economics is whether economic growth, by itself, is enough to reduce poverty.
The question came up in the most recent edition of Development Drums. Claire Melamed argued that the fact that so many of the world’s poor now live in middle income countries (which, by definition, have experienced a reasonable amount of economic growth) suggests that growth by itself is not enough to reduce poverty. Andy Sumner, in the same programme, said that there is some evidence that economic growth tends to increase inequality in societies that are already unequal, whereas the benefits will be more broad based in societies in which the starting point is more equal.
This graph by Maxim Pinkovskiy and Xavier Sala-i-Martin is very interesting. It shows the growth rate and the number of people living on less than a dollar a day in sub-Saharan Africa. The data are notoriously incomplete, but on the basis of these estimates, as the authors say (apologies for the econ-speak): “Poverty seems to co-move with GDP almost perfectly.”
This graph implies pretty strongly that if you want to reduce poverty in Africa, you should concentrate on economic growth.
The entire article is well worth reading for its upbeat assessment about both growth and poverty reduction over the last fifteen years. They say:
The sustained African growth of the last 15 years has engendered a steady decline in poverty that puts Africa on track to meet the Goals by 2017. If peace is established in the Democratic Republic of Congo, and it returns to the African trend (which is what happened to other African nations that were formerly at war), Africa will halve its $1/day income poverty rate by 2013, two years ahead of the 2015 target.
Moreover, African poverty reduction has been extremely general. Poverty fell for both landlocked and coastal countries, for mineral-rich and mineral-poor countries, for countries with favourable and unfavourable agriculture, for countries with different colonisers, and for countries with varying degrees of exposure to the African slave trade. The benefits of growth were so widely distributed that African inequality actually fell substantially.