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The composition of growth matters for poverty alleviation
 
Author:Loayza, Norman V.; Raddatz, Claudio; Collection Title:Policy, Research working paper ; no. WPS 4077
Country:World; Date Stored:2006/12/05
Document Date:2006/12/01Document Type:Policy Research Working Paper
SubTopics:Achieving Shared Growth; Rural Poverty Reduction; Population Policies; Economic Growth; Labor MarketsLanguage:English
Region:The World RegionReport Number:WPS4077
Volume No:1 of 1  

Summary: This paper contributes to explain the cross-country heterogeneity of the poverty response to changes in economic growth. It does so by focusing on the structure of output growth. The paper presents a two-sector theoretical model that clarifies the mechanism through which the sectoral composition of growth and associated labor intensity can affect workers' wages and, thus, poverty alleviation. Then it presents cross-country empirical evidence that analyzes first, the differential poverty-reducing impact of sectoral growth at various levels of disaggregation, and the role of unskilled labor intensity in such differential impact. The paper finds evidence that not only the size of economic growth but also its composition matters for poverty alleviation, with the largest contributions from labor-intensive sectors (such as agriculture, construction, and manufacturing). The results are robust to the influence of outliers, alternative explanations, and various poverty measures.

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