Pro-poor growth

'''Pro-poor growth '''

definition          “There are two main approaches to defining pro-poor growth. Both require that ‘the poor’ be identified by specifying a poverty line, such as the international $1 a day line or a national poverty line. The people whose incomes lie below this line are the poor. The absolute definition of pro-poor growth considers only the incomes of poor people. How ‘pro-poor’ growth is should be judged by how fast on average the incomes of the poor are rising. On this definition, the correct measure of pro-poor growth is that used on the vertical axis of the figure above. Its ranking of countries would put Chile and India at the top, followed by Ghana, Bangladesh and Brazil, and with Zambia (where the incomes of the poor fell) at the bottom.

The absolute definition of pro-poor growth is closely related to the speed at which absolute poverty is reduced: if the rate of pro-poor growth accelerates, then all standard measures of income poverty fall faster. In other words, if the incomes of poor people were to grow faster, this would lead to a more rapid reduction both of the extent of poverty (as measured, for example, by the proportion of people living on less than $1 a day) and of the depth of poverty (how far most poor people are below the poverty line).

The relative definition of pro-poor growth compares changes in the incomes of the poor with changes in the incomes of people who are not poor. Growth is ‘pro-poor’ if the incomes of poor people grow faster than those of the population as a whole. In other words, for growth to be pro-poor on this definition, income inequality must fall. In the figure, only Ghana’s growth was clearly pro-poor in this relative sense (although Zambia’s negative growth was also ‘pro-poor’ inasmuch as the poor suffered less because inequality fell).

Which of these two definitions of pro-poor growth is preferable depends on one’s objectives. If the objective is to reduce absolute poverty, the absolute definition is evidently better. This can be seen in the figure by comparing Ghana with India. On the relative definition of pro-poor growth, Ghana comes out ahead of India. But the incomes of the poor grew faster in India (3.2% p.a.) than in Ghana (1.6% p.a.). In other words, despite its falling inequality, Ghana’s slower overall growth resulted in less poverty reduction than in India, which had rising inequality but a higher overall growth rate.”

http://www.sed.manchester.ac.uk/research/iarc/ediais/pdf/BriefingNote1.pdf