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WP/92 Income Distribution and Growth's Ability to Reduce Poverty: Evidence from Rural and Urban African Economies

The present study examines the degree 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, with special attention accorded the possible rural-urban dichotomy.
Publisher:
UNU-WIDER
Series:
WIDER Working Paper
Volume:
2010/92
Title:
WP/92 Income Distribution and Growth's Ability to Reduce Poverty: Evidence from Rural and Urban African Economies
Authors:
Augustin Kwasi Fosu
Publication date:
August 2010
ISBN 13 Web:
978-92-9230-330-3
Copyright holder:
© UNU-WIDER
Copyright year:
2010
Keywords:
Income distribution, income growth, poverty, rural and urban African economies
JEL:
D31, I32, O49
Project:
Country Role Models for Development Success
Sponsor:
UNU-WIDER gratefully acknowledges the financial contributions to the research programme by the governments of Denmark (Royal Ministry of Foreign Affairs), Finland (Ministry for Foreign Affairs), Sweden (Swedish International Development Cooperation Agency—Sida) and the United Kingdom (Department for International Development—DFID).
Format:
online and printed copies
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