The Effect of Income Distribution on the Ability of Growth to Reduce Poverty: Evidence from Rural and Urban African Economies |
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| Authors: | Augustin Kwasi Fosu |
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| Institution: | 1. UN University‐World Institute for Development Economics Research (UNU‐WIDER), Helsinki, Finland;2. Deputy Director, UN University‐World Institute for Development Economics Research (UNU‐WIDER), Helsinki, Finland (e‐mail: );3. honorary RDRC Research Fellow, University of California–Berkeley, USA;4. and honorary BWPI Research Associate, University of Manchester, UK. Views expressed herein are not attributable to any institution of affiliation. The author holds a PhD in economics from Northwestern University. He is co‐editor of the Journal of African Economies (Oxford) and also serves on several other editorial boards of journals, including: Feminist Economics;5. Journal of Development Studies;6. Oxford Development Studies;7. World Bank Economic Review;8. and World Development. The author is grateful to Paul Kamau for earlier valuable research assistance and to two anonymous referees for helpful comments. |
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| Abstract: | The present study examines the extent to which income distribution affects the ability of economic growth to reduce poverty, based on 1990s data for a sample of rural and urban sectors of African economies. Using the basic‐needs approach, an analysis‐of‐covariance model is derived and estimated, with the headcount, gap, and squared gap poverty ratios serving as the respective dependent variables, and the Gini coefficient and PPP‐adjusted incomes as explanatory variables. The study finds that the responsiveness of poverty to income growth is a decreasing function of inequality, albeit at varying rates for the three poverty measures: lowest for the headcount, followed by the gap and fastest for the squared gap. The ranges for the income elasticity in the sample are estimated at: 0.02–0.68, 0.11–1.05, and 0.10–1.35, respectively, for these poverty measures. Furthermore while, on average, the responsiveness of poverty to income growth appears to be the same between the rural and urban sectors, there are substantial sectoral differences across countries. The results suggest the need for country‐specific emphases on growth relative to inequality. |
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