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Growth is good for the poor, Volume 1
 
Author:Dollar, David; Kraay, Aart; Collection Title:Policy Research working paper ; no. WPS 2587
Date Stored:2001/05/11Document Date:2001/04/30
Document Type:Policy Research Working PaperSubTopics:Environmental Economics & Policies; Governance Indicators; Achieving Shared Growth; Economic Theory & Research; Economic Conditions and Volatility; Inequality; Services & Transfers to Poor; Poverty Impact Evaluation
Language:EnglishMajor Sector:(Historic)Social Protection
Report Number:WPS2587Sub Sectors:Other Social Protection
Volume No:1Related Dataset:Growth is Good for the Poor (published in the Journal of Economic Growth, 2002) dataset;

Summary: When average income rises, the average incomes of the poorest fifth of society rise proportionately. This is a consequence of the strong empirical regularity that the share of income accruing to the bottom quintile does not vary systematically with average income. The authors document this empirical regularity in a sample of 92 countries spanning the past four decades and show that it holds across regions, periods, income levels, and growth rates. The authors next ask whether the factors that explain cross-country differences in the growth rates of average incomes have differential effects on the poorest fifth of society. They find that several determinants of growth--such as good rule of law, opennness to international trade, and developed financial markets--have little systematic effect on the share of income that accrues to the bottom quintile. Consequently, these factors benefit the poorest fifth of society as much as everyone else. Thee is some weak evidence that stabilization from high inflation and reductions in the overall size of government not only increase growth but also increase the income share of the poorest fifth in society. Finally, the authors examine several factors commonly thought to disproportionately benefit the poorest in society, but find little evidence of their effects. The absence of robust findings emphasizes that relatively little is known about the broad forces that account for the cross-country and intertemporal variation in the share of income accruing to the poorest fifth of society.

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