Institutional Foundations for Shared Growth in Sub‐Saharan Africa*

Abstract: The paper examines the dynamically evolving triangular relationships between institutions, growth and inequality in the process of economic development, in order to deepen the understanding of institutional conditions for pro‐poor growth and shared growth. In this context, the paper discusses the institutional conditions found in sub‐Saharan Africa, which may have produced the growth pattern that is unequal and against the poor. The analysis shows that sub‐Saharan African countries require transforming institutions for embarking upon and sustaining a development path which would ensure shared growth in years to come. The paper first evaluates the growth‐inequality‐poverty nexus, as found in the recent literature, which increasingly challenges the trade‐off between growth and equity, as postulated in the traditional theories. Various definitions of pro‐poor growth are discussed and a sharper definition of the concept of ‘shared’ growth is provided. Definitions of institutions are then examined, as well as the triangular inter‐relationships between institutions, inequality and poverty. The paper finally analyses specific institutional conditions found in sub‐Saharan Africa that prevent economies from emerging out of low‐equilibrium poverty traps that are characterized by low economic growth, unequal distribution of income and wealth as well as unequal access to resources and power.     

Economic Restructuring,Informal Jobs and Pro‐poor Growth in Urban China

Based on household survey datasets and the framework of pro‐poor growth, the present paper discusses how economic growth and inequality affect poverty reduction in urban China. The findings in this paper suggest that the poor benefit from economic growth through the trickle‐down effect, but that the poor benefit disproportionally less than the nonpoor in both periods, from 1988 to 1995 and from 1995 to 2002; however, in the latter period, the pro‐poorness is higher than that of the former period. Using the principle of Shapley decomposition, this paper develops an index of pro‐poor growth for each income component, and finds that the income from informal jobs is the main contributor to the pro‐poorness of growth during the period 1995 to 2002.     

Economic growth,inequality, and poverty in Vietnam

This study examines how poverty reduction has been associated with economic growth and inequality in Vietnam. It finds that although the speed of poverty reduction was lower in the 2000s than in the 1990s, economic growth was more pro‐poor in the latter period. During the 1993–98 period, expenditure inequality increased and the poverty reduction during this period was mainly caused by economic growth. During the 2004–08 period, however, expenditure inequality decreased, thereby contributing to poverty reduction. The poverty incidence declined by around 5 percentage points, of which expenditure growth and redistribution contributed 2.8 and 2.2 percentage points of poverty reduction, respectively.     

Poverty Alleviation in the People's Republic of China: The Implications for Sino–African Cooperation in Poverty Reduction

Abstract: In the last thirty years, remarkable achievements have been made in China's poverty reduction course. The dramatic fall in China's poor can be attributed mainly to a high rate of economic growth, government poverty reduction policies and targeted programmes and pro‐poor macroeconomic and industrial policies. This paper focuses on China's poverty reduction policies and programmes and their impact on the poor regions and poor households. Lessons are drawn for poverty reduction and economic development in African countries. The paper also explores the potential for collaboration in poverty reduction between China and African countries and recommendations are made for the governments and donor agencies.     

The Questionable Economics of Development Assistance in Africa: Hot-Fresh Evidence, 1996–2010

This paper assesses the aid-development nexus in 52 African countries using updated data (1996–2010) and a new indicator of human development (adjusted for inequality). The effects of Total Net Official Development Assistance (NODA), NODA from the Development Assistance Committee (DAC) and NODA from Multilateral donors on economic prosperity (at national and per capita levels) are also examined. The findings broadly indicate that development assistance is detrimental to GDP growth, GDP per capita growth and inequality adjusted human development. The magnitude of negativity (which is consistent across specifications and development dynamics) is highest for NODA from Multilateral donors, followed by NODA from DAC countries. Given concerns on the achievement of the MDGs, the relevance of these results point to the deficiency of foreign aid as a sustainable cure to poverty in Africa. Though the stated intents or purposes of aid are socio-economic, the actual impact from the findings negates this. It is a momentous epoque to solve the second tragedy of foreign aid; it is high time economists and policy makers start rethinking the models and theories on which foreign aid is based. In the meantime, it is up to people who care about the poor to hold aid agencies accountable for piecemeal results. Policy implications and caveats are discussed.     

Public debt and economic growth – economic systems matter

Most studies on the relationship between public debt and economic growth implicitly assume homogeneous debt effects across their samples. We –in accordance with recent literature– challenge this view and state that there likely is a great deal of cross-country heterogeneity in that relationship. However, other than scholars assuming that all countries are different, we expect that clusters of countries differ. We identify three country clusters with distinct economic systems: Liberal (Anglo Saxon), Continental (Core EU members) and Nordic (Scandinavian). We argue that different degrees of fiscal uncertainty at comparable levels of public debt between those economic systems constitute a major source of heterogeneity in the debt-growth relationship. Our empirical evidence supports this assumption. Continental countries face more growth reducing public debt effects than especially Liberal countries. There, public debt apparently exerts neutral or even positive growth effects, while for Nordic countries a non-linear relationship is discovered, with negative debt effects kicking in at public debt values of around 60% of GDP.     

Does Economic Growth Really Benefit the Poor? Income Distribution Dynamics and Pro-poor Growth in Indonesia

We explore the nexus between poverty, inequality, and economic growth in Indonesia between 2002 and 2012, using several pro-poor growth concepts and indices to determine whether growth in this period benefited the poor. Our regression-based decompositions of poverty into growth and redistribution components suggest that around 40% of inequality in total household expenditure in Indonesia was due to variations in expenditure by education characteristics that persisted after controlling for other factors. We find that economic growth in this period benefited households at the top of the expenditure distribution, and that a ‘trickle down’ effect saw the poor receive proportionately fewer benefits than the non-poor. If reducing poverty is one of the Indonesian government's principal objectives, then policies designed to spur growth must take into account the possible impacts of growth on inequality.     

Pro-poor growth and social protection in South Africa: Exploring the interactions

This study evaluates the impact of South Africa's long-term economic growth on household poverty and inequality between 1995 and 2005. We find a decline in aggregate levels of poverty, but increasing levels of inequality. The evidence suggests that the growth model provides substantial redistributive income support to the poor through the social grant programme, whilst offering few returns to those in the middle of the distribution.     

基于经济增长的新疆减贫效果趋势分析

经济增长和减贫一直是发展中国家和地区制定发展战略所考虑的重点。改革开放初期,新疆通过经济增长极大地降低了农村贫困,经济增长的减贫效果显著;20世纪80年代中后期至2010年,由于经济增长的质量下降和收入不平等程度增加,减贫趋势变缓;2011年以后,随着援疆工作和民生工程的不断推进,高速的经济增长和对贫困人口有利的收入分配对减贫起到了良好的效果,经济增长出现了益贫性特征。纵观改革开放至今,新疆减贫成就的主要原因是经济持续的高速增长、人力资本的明显改善和政府采取的反贫困行动;而其减贫趋势放缓的原因是农村经济增长质量的下降和农村收入分配的不断恶化。为此,本文认为新时期扶贫工作中,新疆应实施益贫式增长战略。从生产领域着手,在增加就业的同时通过增加穷人的资产基础以提高穷人的自我发展能力,而政府在打造民生工程时应注重市场机制,以保持减贫的可持续性。     

The basic needs approach: A missing ingredient in development theory?

The poor record of conventional development theories in reducing poverty in developing countries may result from the neglect of certain preconditions that are necessary before the people of a developing country are receptive to conventional economic stimuli. The basic needs approach, in its various forms, focuses on some of these requirements through its emphasis on human development and the recognition that economic development does not take place in a social vacuum.

In this article a critical threshold of basic needs satisfaction is said to be a necessary, but not sufficient, precondition for economic development. Only if such a threshold has been achieved, will a population be receptive to those elements responsible for successful development in economically more‐advanced societies.     

The Short‐Term Economic Impact of Levying E‐Tolls on Industries

TERM is used to analyse the short‐term regional economic impact of an increase in industries' transport costs when paying E‐Tolls. Market‐clearing and accounting equations allow regional economies to be represented as an integrated framework, labour adjusts to accommodate increasing transportation costs, and investments change to accommodate capital that is fixed. 1 1 TERM is a bottom‐up CGE model designed for highly disaggregated regional data. The Enormous Regional Model's originate from Horridge et al. ( 2005 ) and are better explained in Horridge ( 2011 ).
We concluded that costs from levying E‐Tolls on industries are small in comparison to total transport costs, and the impact on economic aggregates and most industries are marginal: investments (?0.404%), gross domestic product (GDP) (?0.01) and consumer price inflation (?0.10%). This is true even when considering costs and benefits on industries as well as consumers. Industries that experienced the greatest decline in output were transport, construction and gold. Provinces that are closer to Gauteng and have a greater share of severely impacted industries experienced larger GDP and real income reductions. Mpumalanga's decrease in GDP was 17% greater than Gauteng's.     

An Analysis of Welfare Changes in Zimbabwe*

Abstract: This paper presents a brief account of welfare changes in Zimbabwe along the income and education dimensions between 1995 and 2003. Using sequential dominance procedures, we find that education attainment substantially improved over time. However, these gains did not necessarily translate into poverty reduction, rather welfare over the joint distribution of income and education dramatically deteriorated. These results are robust for all education partitions, income thresholds and a broad class of welfare indices. A further inquiry into the factors underlying this apparent disconnection between education and income using decomposition techniques reveals that the increase in poverty incidence cannot be attributed to household characteristics but is reflective of the broader socio‐economic trends prevailing at the time. The decline in economic growth contributed tremendously to the decline in welfare while inequality changes account for a small proportion.     

Widjojo Nitisastro and Indonesian development

Widjojo Nitisastro (2010) Pengalaman Pembangunan Indonesia: Kumpulan Tulisan dan Uraian Widjojo Nitisastro [The Experience of Development in Indonesia: A Collection of the Writings of Widjojo Nitisastro], Penerbit Buku Kompas [Kompas Book Publishing], Jakarta.

Widjojo Nitisastro is one of Indonesia's best-known economic policy makers. Much has been written by others about his role as a top adviser over more than three decades. This collection of his own essays helps fill out the picture. Seven main policy themes may be identified: the role of economic growth in helping overcome mass poverty; the need for economic policy makers to pay close attention to risk management and be constantly ready to respond to economic shocks; the importance of strong leadership and discipline in government; the need to scrutinise investment programs closely; the high priority to be given to borrowing programs and debt management; the role of the price mechanism; and the management of Indonesia's relations with the international community. Strong messages about growth, leadership and stability permeate the essays. The collection is a valuable contribution to the literature on economic policy making in developing countries.     

Exploring the Impact of Energy Sources on Production,Inequality and Poverty in Simultaneous Equations Models for South Africa

Abstract: This work adapts per capita income, energy demand (sub‐group decomposed), inequality and poverty frameworks in a simultaneous equations setting to investigate the role of energy sources on per capita income, inequality and poverty in South Africa. It finds that energy sources (particularly electricity and diesel) are important in estimating production functions. Gasoline, kerosene and coal all exacerbate poverty, with the highest impacts on abject poverty. It is better to disaggregate energy sources in order to capture resource‐specific details. Redistribution efforts that focus on reduction of between‐group inequality can also moderate energy use since between‐group inequality tends to increase the demand for most energy sources. Public efforts are yielding fruits in this direction and should be encouraged. Access to energy sources like electricity, diesel and gas are crucial for productivity enhancement, but for them to yield significant anti‐poverty fruits, efforts must also target broadening capital access by the poor.     

Counting The Poor in Indonesia∗

A confusing aspect of the now rather large literature on trends in poverty in Indonesia in the New Order period is that virtually every study has used a different poverty line concept; indeed, even the World Bank appears to have used different poverty lines in different published studies and unpublished reports Unlike the government of Malaysia, for example, the Indonesian government has not chosen to promulgate a poverty line in its official planning documents, and successive Five Year Development Plans have had very little to say about poverty trends. However, the Central Bureau of Statistics (BPS) has in recent years put forward its own poverty line concept which has been used to estimate numbers in poverty in urban and rural areas, and these estimates have been published for some years in the annual Indikator Kesejahteraan Rakyat [Welfare Indicators]. Although the BPS estimates are now widely quoted in Indonesia, they have not won universal acceptance, and other authors continue to use other poverty line concepts and thus derive different conclusions regarding the extent of poverty in Indonesia, the regional distribution of the poor and trends in poverty over time.

One purpose of this paper is to review critically these different poverty concepts and to explain why they have produced different results. A second aim is to compare the Indonesian poverty line estimates with those from neighbouring ASEAN countries. Finally, some suggestions will be made on possible new initiatives in poverty research in Indonesia.

     

China's War on Poverty: Assessing Targeting and the Growth Impacts of Poverty Programs

In this paper, we attempt to assess the effectiveness of China's Poverty Alleviation Programs in contributing to economic growth in poor areas. To meet this overall goal, we briefly describe China's poor area policy and examine how its leaders have implemented one of the developing world's largest poverty alleviation programs. Second, we examine whether or not the poverty programs have been implemented in the parts of China that are truly poor. Finally, we attempt to assess if the poverty programs have affected growth. The major findings are that China's poverty programs do get implemented in areas of the nation that are poor, but there are many poor areas that have been left out of the government's various programs. We also find that poverty programs contribute to economic growth and that economic growth promotes poverty reduction.     

The Nordic Countries' Trade Liberalisation in the 1950s: An introduction

Abstract

The fall of the Soviet Union re-awoke the interest in economic regime transformation. ¹ See for instance Dornbusch, R. et al (eds.), Postwar Economic Reconstruction and the Lessons for the East Today, Cambridge, Mass.: MIT Press 1993. How should liberated states navigate the complex and difficult transition from state controlled bilateralism to a market-oriented multilateralism? Liberalisation and structural adjustment could happen faster than the social institutions were capable of absorbing. Transnational economic integration brings returns and efficiency, but at the same time challenges the social and political institutions on which the economic transactions are based. Liberalisation of trade, capital and payments impose considerable constraints on the democracies' governments in their pursuit of national consensus, stability and prosperity. This topic is at the core of the globalisation debate, and formulated as a trilemma between economic integration, proper public economic management and national sovereignty. ² Lawrence, S.H., Reflections on managing Global Integration, Journal of Economic Perspectives, vol. 23, 1999, 3–18.      

Assessing Poverty Trends in Indonesia by International Poverty Lines

Indonesia has made well-documented and drastic progress in raising average incomes and reducing poverty. This article adds to the literature by providing a complementary perspective of poverty between 1984 and 2011. We discuss the evolution of poverty in Indonesia using international poverty lines—$1.25 per person per day (in 2005 purchasing power parity dollars) and $2.00 per day, and we add $10.00 per day. We generate estimates of poverty since 1984 and make projections based on various trends in growth and inequality. We find that Indonesia has the potential to become a high-income country by around 2025 and end $1.25-per-day and $2.00-perday poverty by 2030, but this will require strong economic growth and favourable changes in distribution. Looking ahead, the end of poverty in Indonesia may mean that a large proportion of the population will remain vulnerable to poverty for some time to come, suggesting that public policy priorities will need to balance insurance and risk-management mechanisms with more ‘traditional’ poverty policy.     

Trade Opening,Fiscal Reforms,Poverty, and Inequality: A CGE Analysis for Bangladesh

We assess the short‐ and long‐run impacts of tariff reform policies on Bangladeshi households' poverty and income distribution by developing an 86‐sector, four‐factor, and nine‐household‐group computable general equilibrium (CGE) model. The main findings are that the complete removal of tariffs leads to a decrease in overall poverty with rich household groups in a relatively better position. In the short run poverty incidence increases for rural landless, urban illiterate, and low‐educated household groups whereas rural large farmer and urban medium household groups enjoy improvements in all poverty indicators. In terms of income distribution, trade liberalization enhances inequality slightly, but there is a tendency towards more equitable distribution in the long run. The choice of a fiscal compensatory mechanism with consumption tax is likely to play a negative role in terms of poverty and inequality in the short run; however, interestingly, the results are pro‐poor in the long run.     

Distributional Impact of Globalization‐induced Migration: Evidence from a Nigerian Village

Abstract: One of the contentious issues about the globalization process is the mechanism by which globalization affects poverty and inequality. This paper explores one of the various strands of the globalization–inequality–poverty nexus. Using microlevel survey data from over 300 poor households in the small village of Umuluwe (about 30 miles west of the regional capital of Owerri) in south‐east Nigeria, the paper investigates whether individuals who migrate from the village to take advantage of the urban‐biased globalization process do better than non‐migrant villagers. The paper concludes that, while the migrant villagers tend to earn slightly higher incomes than the non‐migrant villagers, the poverty profiles of both categories of households are essentially the same. In other words, and contrary to conventional wisdom, globalization has not succeeded in alleviating poverty amongst the poor villagers who explicitly took advantage of the process. The paper argues that, by changing relative prices in the urban areas, structural adjustment appears to have eliminated any advantage that globalization may have bequeathed to the migrant villagers.