A Unified Framework for Pro-Poor Growth Analysis

Abstract

Starting with a general impact indicator as an evaluation criterion, this paper offers an integrative framework for a unified discussion of various concepts and measures of propoor growth emerging from the current literature. It shows that whether economic growth is considered pro-poor depends fundamentally on the choice of evaluative weights. In addition, the framework leads to a new indicator of the rate of pro-poor growth that can be interpreted as the equally distributed equivalent growth rate. This is a distribution-adjusted rate of growth that depends on the chosen level of inequality aversion. Illustrations based on data for Indonesia in the 1990s show a strong link between growth and poverty reduction in that country. A decomposition of the observed poverty outcomes reveals the extent to which changes in inequality have blunted the poverty impacts of both growth and contraction. Finally, the results also demonstrate that absolute and relative indicators of pro-poor growth can lead to conflicting conclusions from the same set of facts.

Pro‐Poorness Orderings

“…For the comparison to be meaningful we need to assume that there is at least one poor person and at least one non‐poor person. This approach parallels the stochastic dominance analysis employed in the context of poverty ordering (see Foster and Shorrocks, and Foster et al 2013).…”

“…Osmani () adopted an intermediate framework and consequently there have been different summary measures of pro‐poorness. Essama‐Nssah (); Essama‐Nssah and Lambert () identify a growth pattern with the elasticity function of individual income with respect to total income and note its importance as a vehicle in the measurement of pro‐poorness. This elasticity function is defined as , where h and H denote individual income and total income respectively.…”

“…But generalized Lorenz domination of a distribution over another is also equivalent to the condition that the former can be obtained from the latter by a finite sequence of rank preserving income increments and a finite sequence of rank preserving progressive transfers or simply by finitely many rank preserving income increments (see Foster and Shorrocks, , Lemma 2) and Chakravarty (2009, Theorem 2.1). A similar remark concerning rank preserving progressive transfers holds in the context of Lorenz domination.…”

Evaluating Patterns of Income Growth when Status Matters: A Robust Approach

“…Hence, as a response to the original macroeconomic approach, two alternative microeconomic approaches have been developed to evaluate growth and its distributional implications. The first is the disaggregated anonymous approach, which evaluates growth processes on the basis of the income change experienced by each part of the distribution (see, among others, Ravallion and Chen, ; Son, ; Essama‐Nssah, ). Its main tool is the Growth Incidence Curve (GIC, Ravallion and Chen, ), which plots against each percentile of the distribution the mean income change of that percentile.…”

Measuring Pro‐poorness: A Unifying Approach With New Results

“…See Kakwani and Son (2008b, especially p. 646) for further discussion and comparison with relative approaches. Essama‐Nssah (2005) offers a similar framework, but applying a broader social evaluation criterion to the growth rates of all incomes (not just for the poor). His specification of the social weights defining the evaluation criterion respects the Dalton–Pigou principle of transfers, and leads to a pro‐poor growth indicator interpreted as the equally distributed equivalent growth rate .…”