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Pro-Poor Growth

What do we mean by pro-poor growth and how do we measure it?
Why are some growth processes more pro-poor than others?

This component aims to provide a deeper understanding of:

  1. the role played by initial conditions (including initial inequalities) in acheiving pro-poor economic growth, and
  2. what drives the distributional changes we see in survey data, including churning (whereby there are gainers and losers at each level of living).

The following subcomponents will address this question from various perspectives, focusing on areas where there appears to be high value-added from new research.


Pro-Poor Growth and Inequality at Country Level

Aggregate inequality is a strong predictor of differences in the growth elasticity of poverty across countries. In an economy where inequality is persistently low, one can expect that the poor will tend to obtain a higher share of the gains from growth than in an economy in which inequality is high. To put this another way, an important determinant of the rate of poverty reduction is the distribution-corrected rate of growth in average income, given by a measure of initial equality (100 minus the measure of inequality) times the rate of growth. Indeed, the distribution-corrected growth rate knocks out the ordinary growth rate when both are used in a regression for the rate of poverty reduction.

To draw out the implications for policy from this finding, we need to develop a deeper understanding of the specific ways in which inequality matters to how much impact a given rate of growth has on poverty. Three questions will motivate the planned research under this heading:

What specific aspects of “distribution” matter? The Gini index is a well-known summary statistic, but it is only one of many possible measures and there can be no presumption that it aggregates relative welfare levels consistently with the way they impact on the poverty-reducing impact of growth. It would be better to start from a more flexible representation of the distribution and how it is changing. Aggregation should also be consistent with the purpose at hand, in this case assessing impacts on poverty.

What specific dimensions of “inequality” are likely to matter? Possibly it is not income inequality per se that matters to the rate of poverty reduction at a given rate of growth. Some inequalities (such as in human capital) may matter more than others to how much the poor share in growth.

What economic and non-economic factors underlie the measured differences in distribution, as relevant to why growth is more pro-poor in some settings than others? There are conflicting results in the literature, notably on the effects of greater openness on inequality. There are also signs of important interaction effects between the diverse initial conditions of countries and the impacts of economic policy reforms on inequality.
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Subnational Determinants of Pro-Poor Growth

Geographic data bases within countries offer the prospect of a cleaner identification of the factors underlying the heterogeneity in impacts of economic growth on poverty than is possible using cross-country data sets. A “benchmark” paper on this topic has been completed for India. That paper used a long time series of household surveys (spanning 20 years) at state level to construct comparable consumption-poverty measures and collate these with aggregate data on the sectoral composition of economic growth. The paper then tested for inter-state differences in the impact of growth on poverty and (when such differences were found) explained them in terms of state-level factors, such as the composition of growth, literacy, urban-rural dualism and rural infrastructure. By allowing for explicit interaction effects between these factors and growth the paper was able to test hypotheses about what specific aspects of “inequality” mattered to pro-poor growth in India. A copy of this paper is provided in the library (see Ravallion and Datt, “Why Has Economic Growth Been More Pro-Poor in Some States of India than Others?”). The program will aim to develop further country case studies along similar lines, for which the most promising cases appear to be Brazil, China and Indonesia. The time periods will vary according to data availability, and this will also take account of sample sizes. For example, in the case of Indonesia it will be possible to construct finer (sub-provincial) geographic units if we focus on the SUSENAS surveys since the early 1990s that have used greatly expanded sample sizes over those for the 1980s.

Questions are also being asked about the role played in the evolution of the living standards by geographic factors, such as poor (physical and human) infrastructure and weak social organization. Differences across areas in these factors have been found to play an important role in the longer-term progress in poverty reduction across states of India, notably in terms of how much impact growth has on poverty. There are opportunities for looking at the same questions in other countries, including Brazil, China and Indonesia.

Such questions have been stimulated by both operational experience and economic theory. But to date there has been only limited empirical work able to shed light on such processes. There are a number of new (data and analytic) tools that can help. One is the use of household panel data collated with geographic data bases to better understand how location influences the evolution of living standards, allowing for latent (individual and geographic) heterogeneity. Recent research has shown promise in developing such models in China, and there is interest in extending the approach to other settings with appropriate data.

Income Dynamics, Risk and Vulnerability

A number of panel data studies have suggested considerable churning under the surface of the aggregate distributional statistics. Some of this is inter-temporal measurement error. But economic theory and a body of empirical evidence suggest that risk market failures entail considerable exposure to uninsured risks. It has also been argued (though the evidence is as yet scant) that exposure to uninsured risks can create poverty traps and mean that initial inequalities in various dimensions can impede overall rates of economic growth and poverty reduction. An important challenge remains to properly test the links in these theoretical arguments and flesh out their implications for development policy. Household-level panel data sets for a number of countries could be used to study the features of household income dynamics. This could embrace a number of the concerns coming from the regions to better understand the (distinct?) causes of “persistent” vs “transient” poverty.

A key question for which there has been very little empirical work concerns the possibility of nonlinearity in income dynamics. Nonlinear dynamics in household incomes can yield poverty traps and distribution-dependent growth. The potential implications for policy are dramatic; effective social protection from transient poverty will be an investment with lasting benefits, and pro-poor redistribution will promote aggregate economic growth. It is proposed to test for non-linearity in the dynamics of household expenditures and incomes using panel data for China, Hungary, Pakistan and Russia.

A specific question raised in recent policy discussions concerns the extent to which cross-sectional information on household and group characteristics can be used to ascertain the likelihood of a future adverse outcome in the event of an adverse future event, aggregate or idiosyncratic. The term ‘vulnerability’ is increasingly being used to connote such ex-ante exposure to uninsured risk.

We propose to study how well household-level vulnerability can be predicted ex ante. Current work on transient poverty requires panel data sets which are typically not available and can be quite costly to collect. There is considerable interest in finding ways to identify the characteristics of vulnerable households and groups using cross-section data (this was raised by the Bank’s Social Protection Board in a presentation of DECRG work on social protection). Given that income risks are endemic, and households are likely to be differentially buffered against such risks, an ex-ante measure of vulnerability is likely to be quite useful, by allowing policy makers to identify the characteristics of the most vulnerable and thus devise policy levers that are pro-active and forward looking, i.e., focus on poverty prevention.

However, research is needed to test how well it is possible to predict vulnerability ex ante. The simplest version of the stochastic permanent income hypothesis predicts that consumption should behave as a martingale, such that current household circumstances would have no ability to predict future changes in consumption. This would not suggest much hope for predicting “vulnerability” ex ante, though tests of the PIH in developing country settings have not been supportive. Several recent papers have proposed vulnerability measures. The papers share a common definition of vulnerability but offer rather different measurement strategies.

The proposed research will test the measures of vulnerability proposed in the existing literature, and develop new measures if necessary. Our empirical strategy will be to exploit existing panel datasets, which allow us to view actual transitions in the data against proposed vulnerability measures. In short, we will see to what extent revealed vulnerability to down-side risk can be predicted on the basis of currently available data.

Social Exclusion and Poverty

Social exclusion refers to social arrangements or structures within a society that systematically exclude disadvantaged groups from economic opportunities for reasons other than their potential productivity. Social exclusion appears to be an important but under-researched impediment to pro-poor growth. One often finds high and resistant poverty amongst certain social groups, identified by gender, ethnicity or culture. There have also been claims that these groups are often being left out of the growth process (even when pro-poor overall). Support for such claims has been found in some recent research pointing to the instrumental importance of inequalities defined on social or ethnic dimensions to aggregate welfare outcomes.

There is a potentially large set of questions about what should be done to address this type of poverty. We have chosen four specific topics under this heading, as potential “benchmark” studies that might help stimulate further research.

The first of the proposed studies starts from the observation that, while there have now been several studies documenting the loss in income from belonging to a socially excluded group from many parts of the world, there has been less work trying to understand the strategies that excluded groups use to counter the discrimination they face. To understand some of these strategies, we propose to examine qualitative and quantitative data from slums in Delhi India, where 60 per cent of the population comes from a schedule caste or tribe and is therefore classified as disadvantaged. How do the social networks of the disadvantaged differ from other groups? Do these groups access a different mix of occupations? Are they less likely to face discrimination in the anonymity of the city rather than within the traditional constraints of the village?

The second subcomponent stems from arguments that social exclusion is best remedied by affirmative action. Affirmative action has taken various forms – usually by providing preferred admissions and subsidies for education and employment. One innovative strategy in India has been to try to break traditional power structures in rural India by “reserving” seats for schedule castes and women in Panchayats – village government. The effectiveness of this strategy has never been properly evaluated. We propose to supplement a recent project that uses a natural experiment comparing border regions of Indian states to tease out the extent to which this affirmative action strategy has resulted in concrete improvement in increased decision making power, and public service delivery for disadvantaged groups.

The third subcomponent concerns gender discrimination. This is pervasive all over the developing world and has important implications for the distribution of resources within the family. Several studies have now documented that women who have better outside options tend to have children who are better nourished and educated. What is less understood, however, is how gender discrimination actually works. What are the social and cultural mechanisms that exclude women from decision making? How do these social and cultural structure interact with economic choices to affect distribution within the family? We will use survey data from rural India and Indonesia that asks questions on who makes decisions on a set of important issues within the household.

The fourth subcomponent will provide a case study in using mixed (quantitative and qualitative) methods to study poverty and social exclusion in Brazil. Recent studies have sought to identify the structural sources (returns to education, access to government pensions, etc) of Brazil’s inequality. However, several important questions remain. What role is played by social exclusion in perpetuating inequality in Brazil? Which precise groups are excluded from full participation in Brazilian society and economy, and how does this exclusion manifest itself in rates and levels of poverty? What are the mechanisms (social, legal, economic, political) by which these groups become, and remain, excluded? What strategies do such groups employ to cope with, and in some cases overcome, their situation? How do high rates of exclusion and inequality affect the economic growth process in poor communities and poor regions? To what extent are the poor and excluded groups differentially affected during periods of economic expansion or crisis? How might policy (new initiatives, or reforms to existing ones) help?


The Policy Research Working Papers below (1996-2013) are drawn from the World Bank's institutional archives. You can search the working paper collection here using the author's last name, title, or working paper number ("wpsxxxx").

You can also download other related documents. These include content-rich current outputs (updated document versions, miscellaneous documents, and web pages).

WPS6451Non-farm diversification, poverty, economic mobility and income inequality : a case study in village IndiaHimanshu; Lanjouw, Peter; Murgai, Rinku; Stern, Nicholas2013/05
WPS6448Trade insulation as social protectionDo, Quy-Toan; Levchenko, Andrei A.; Ravallion, Martin2013/05
WPS6429Risk sharing and internal migrationDe Weerdt, Joachim; Hirvonen, Kalle2013/04
WPS6207Handwashing behavior change at scale : evidence from a randomized evaluation in VietnamChase, Claire; Do, Quy-Toan2012/09
WPS5878Average and marginal returns to upper secondary schooling in IndonesiaCarneiro, Pedro; Lokshin, Michael; Ridao-Cano, Cristobal; Umapathi, Nithin2011/11
WPS5873The measurement of educational inequality : achievement and opportunityFerreira, Francisco H. G.; Gignoux, Jeremie2011/11
WPS5883The regressive demands of demand-driven developmentBaird, Sarah; McIntosh, Craig; Ozler, Berk2011/11
WPS5601A practical comparison of the bivariate probit and linear IV estimatorsChiburis, Richard C.; Das, Jishnu; Lokshin, Michael2011/03
WPS5405Economic freedom, human rights, and the returns to human capital : an evaluation of the Schultz hypothesisKing, Elizabeth M.; Montenegro, Claudio E.; Orazem, Peter F.2010/08
WPS5337Revisiting between-group inequality measurement : an application to the dynamics of caste inequality in two Indian villagesLanjouw, Peter; Rao, Vijayendra2010/06
WPS5284Poverty lines across the worldRavallion, Martin2010/04
WPS5259Cash or condition ? evidence from a cash transfer experimentBaird, Sarah; Mcintosh, Craig; Ozler, Berk2010/03
WPS5245Using mixed methods in monitoring and evaluation : experiences from international developmentBamberger, Michael; Rao, Vijayendra; Woolcock, Michael2010/03
WPS5207A new approach to producing geographic profiles of HIV prevalence : an application to MalawiIvaschenko, Oleksiy; Lanjouw, Peter2010/02
WPS5204Measuring inequality of opportunity with imperfect data : the case of TurkeyFerreira, Francisco H. G.; Gignoux, Jeremie; Aran, Meltem2010/02
WPS5103Has India's economic growth become more pro-poor in the wake of economic reforms ?Datt, Gaurav; Ravallion, Martin2009/10
WPS5069The pattern of growth and poverty reduction in ChinaMontalvo, Jose G.; Ravallion, Martin2009/10
WPS5023How many more infants are likely to die in Africa as a result of the global financial crisis ?Friedman, Jed; Schady, Norbert2009/08
WPS4945Modeling migration dynamics in Albania : a hazard function approachAzzarri, Carlo; Carletto, Calogero2009/05
WPS4900International migration and gender differentials in the home labor market : evidence from AlbaniaMendola, Mariapia; Carletto, Gero2009/04
WPS4908Moving up the ladder ? the impact of migration experience on occupational mobility in AlbaniaCarletto, Calogero; Kilic, Talip2009/04
WPS4889Orphanhood and the living arrangements of children in sub-saharan AfricaBeegle, Kathleen; Filmer, Deon; Stokes, Andrew; Tiererova, Lucia2009/03
WPS4858Poverty decline, agricultural wages, and non-farm employment in rural India : 1983-2004Lanjouw, Peter; Murgai, Rinku2009/03
WPS4813Month of birth and children's health in IndiaLokshin, Michael; Radyakin, Sergiy2009/01
WPS4763Bailing out the world's poorestRavallion, Martin2008/12
WPS4802The political economy of village sanitation in south India : capture or poor information ?Ban, Radu; Das Gupta, Monica; Rao, Vijayendra2008/12
WPS4772How does geographic distance affect credit market access in Niger ?Pedrosa, Jose; Do, Quy-Toan2008/11
WPS4677The consequences of child labor : evidence from longitudinal data in rural TanzaniaBeegle, Kathleen; Dehejia, Rajeev H.; Gatti, Roberta; Krutikova, Sofya2008/07
WPS4528Does poverty research in Russia follow the scientific method?Lokshin, Michael2008/02
WPS4463Are there lessons for Africa from China's success against poverty ?Ravallion, Martin2008/01
WPS4431Poverty reduction without economic growth ? explaining Brazil's poverty dynamics, 1985-2004Ferreira, Francisco H. G.; Leite, Phillippe G.; Ravallion, Martin2007/12
WPS4385How relevant is targeting to the success of an antipoverty program ?Ravallion, Martin2007/11
WPS4303Geographic inequity in a decentralized anti-poverty program : a case study of ChinaRavallion, Martin2007/08
WPS4228Poverty, social divisions, and conflict in NepalDo, Quy-Toan; Iyer, Lakshmi2007/05
WPS4212Local conflict and development projects in Indonesia : part of the problem or part of a solution ?Barron, Patrick; Diprose, Rachael; Woolcock, Michael2007/04
WPS4058Learning through monitoring : lessons from a large-scale nutrition program in MadagascarGalasso, Emanuela; Yau, Jeffrey2006/11
WPS4069Partially awakened giants : uneven growth in China and IndiaChaudhuri, Shubham; Ravallion, Martin2006/11
WPS4018Forgone earnings from smoking : evidence for a developing countryLokshin, Michael; Beegle, Kathleen2006/10
WPS4001Superstition, family planning, and human developmentDo, Quy-Toan; Phung, Tung Duc2006/08
WPS3805Di Bao : a guaranteed minimum income in urban China?Chen, Shaohua; Ravallion, Martin; Wang, Youjuan2006/01
WPS3782Who cares about relative deprivation ?Ravallion, Martin; Lokshin, Michael2005/12
WPS3711An econometric method of correcting for unit nonresponse bias in surveysKorinek, Anton; Mistiaen, Johan A.; Ravallion, Martin2005/09
WPS3640Is a guaranteed living wage a good anti-poverty policy?Murgai, Rinku; Ravallion, Martin2005/06
WPS3579A poverty-inequality trade-off?Ravallion, Martin2005/04
WPS3580On the contribution of demographic change to aggregate poverty measures for the developing worldRavallion, Martin2005/04
WPS3574Wage differentials between the public and private sector in IndiaGlinskaya, Elena; Lokshin, Michael2005/04
WPS3543Survey nonresponse and the distribution of incomeKorinek, Anton; Mistiaen, Johan A.; Ravallion, Martin2005/03
WPS3503Lasting local impacts of an economywide crisisRavallion, Martin; Lokshin, Michael2005/02
WPS3479Why should we care about child labor? The education, labor market, and health consequences of child laborBeegle, Kathleen; Dehejia, Rajeev; Gatti, Roberta2005/01
WPS3461Looking beyond averages in the trade and poverty debateRavallion, Martin2004/11
WPS3408China's (uneven) progress against povertyRavallion, Martin; Shaohua Chen2004/09
WPS3280Conditional cash transfers and the equity-efficiency debateDas, Jishnu; Quy-Toan Do; Ozler, Berk2004/04
WPS2975Policy options for meeting the Millennium Development Goals in Brazil : can micro-simulations help?Ferreira, Francisco H. G.; Leite, Phillippe G.2003/02
WPS2846Is India's economic growth leaving the poor behind?Datt, Gaurav; Ravallion, Martin2002/05
WPS2706Household income dynamics in rural ChinaJalan, Jyotsna; Ravallion, Martin2001/11
WPS2666Measuring pro-poor growthRavallion, Martin; Shaohua Chen2001/08
WPS2651China's growth and poverty reduction - trends between 1990 and 1999Shaohua Chen; Yan Wang2001/07
WPS2645Inequality convergenceRavallion, Martin2001/07
WPS2558Growth, inequality, and poverty : looking beyond averagesRavallion, Martin2001/02
WPS2527Is inequality bad for business : a non-linear microeconomic model of wealth effects on self-employmentMesnard, Alice; Ravallion, Martin2001/01
WPS2459Short-lived shocks with long-lived impacts? - household income dynamics in a transition economyLokshin, Michael; Ravallion, Martin2000/10
WPS2409How did the world's poorest fare in the 1990s ?Shaohua Chen; Ravallion, Martin2000/08
WPS2391Are the poor protected from budget cuts? theory and evidence for ArgentinaRavallion,Martin2000/07
WPS2342What can we learn about country performance from conditional comparisons across countries?Ravallion, Martin2000/05
WPS2116Does child labor displace schooling? - evidence on behavioral responses to an enrollment subsidyRavallion, Martin; Wodon, Quentin1999/05
WPS1960Calm after the storms : income distribution in Chile, 1987-94Ferreira, Francisco H. G.; Litchfield, Julie A.1998/08
WPS1901Reaching poor areas in a federal systemRavallion, Martin1998/03
WPS1798Poor areas, or only poor people?Ravallion, Martin; Wodon, Quentin1997/07
WPS1775Can high-inequality developing countries escape absolute poverty?Ravallion, Martin1997/06
WPS1594Why have some Indian states done better than others at reducing rural poverty?Datt, Gaurav; Ravallion, Martin1996/04
WPS1563Equity and growth in developing countries : old and new perspectives on the policy issuesBruno, Michael; Ravallion, Martin; Squire, Lyn1996/01

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