The Composition of Growth Matters for Poverty Alleviation

This paper contributes to explain the cross-country heterogeneity of the poverty response to changes in economic growth. It does so by focusing on the structure of output growth. The paper presents a two-sector theoretical model that clarifies the mechanism through which the sectoral composition of growth and associated labor intensity can affect workers' wages and, thus, poverty alleviation. Then it presents cross-country empirical evidence that analyzes first, the differential poverty-reducing impact of sectoral growth at various levels of disaggregation, and the role of unskilled labor intensity in such differential impact. The paper finds evidence that not only the size of economic growth but also its composition matters for poverty alleviation, with the largest contributions from labor-intensive sectors (such as agriculture, construction, and manufacturing). The results are robust to the influence of outliers, alternative explanations, and various poverty measures.

Bibliographic Details

Main Authors:	Loayza, Norman V., Raddatz, Claudio
Language:	English en_US
Published:	World Bank, Washington, DC 2006-12
Subjects:	ABUSE, AGGREGATE GROWTH, AGGREGATE OUTPUT, AGRICULTURAL GROWTH, CHANGES IN POVERTY, COBB-DOUGLAS PRODUCTION FUNCTION, CONSIDERABLE DISPERSION, CONSTANT RETURNS, COUNTRY SPECIFIC, DEPENDENT VARIABLE, DEVELOPING COUNTRIES, DISTRIBUTION DATA, ECONOMIC ACTIVITY, ECONOMIC CONDITIONS, ECONOMIC GROWTH, ELASTICITY OF SUBSTITUTION, EMPIRICAL EVIDENCE, EMPIRICAL LITERATURE, EMPIRICAL SECTION, EMPLOYMENT, ESTIMATION RESULTS, EXCHANGE RATE, EXPLANATORY VARIABLES, FIXED EFFECTS, GINI COEFFICIENT, GROWTH ^ RATE, GROWTH EFFECT, GROWTH ELASTICITY, GROWTH PATH, GROWTH RATE, GROWTH RATES, GROWTH RELATIONSHIP, HEADCOUNT POVERTY, HIGHER INEQUALITY, HOUSEHOLD DATA, HOUSEHOLD INCOME, HOUSEHOLD SURVEY, HOUSEHOLD SURVEYS, HUMAN CAPITAL, IMPACT ON POVERTY REDUCTION, INCIDENCE OF POVERTY, INCOME DISTRIBUTION, INCOME GROWTH, INCOME INEQUALITY, INDIVIDUAL COUNTRIES, INDUSTRIAL SECTOR, INTERMEDIATE GOODS, LABOR INTENSITIES, LABOR INTENSITY, LABOR MARKET, LABOR MARKETS, LABOR MOBILITY, LABOR REALLOCATION, LABOR SHARE, LABOR-INTENSIVE GROWTH, LEVEL OF TECHNOLOGY, LITERACY RATES, MEAN INCOME, MEAN INCOME GROWTH, MORTALITY, NATIONAL ACCOUNTS, 0 HYPOTHESIS, OUTPUT GROWTH, POLICY CIRCLES, POLICY RESEARCH, POLICY RESEARCH WORKING PAPER, POOR COUNTRIES, POOR HOUSEHOLDS, POOR INDIVIDUALS, POVERTY ALLEVIATION, POVERTY CHANGE, POVERTY CHANGES, POVERTY DATA, POVERTY GAP, POVERTY LEVEL, POVERTY LINE, POVERTY MEASURE, POVERTY MEASURES, POVERTY REDUCING, POVERTY REDUCTION, PRO POOR, PRODUCTION FUNCTION, PRODUCTION GROWTH, REAL WAGE, REAL WAGES, RELATIVE PRICES, RESPECT, RURAL AREAS, SECTOR MODEL, SECTORAL COMPOSITION, SECTORAL GROWTH RATES, SERVICE SECTORS, SHARE OF LABOR, SQUARED POVERTY GAP, TECHNOLOGICAL PROGRESS, TOTAL EMPLOYMENT, TOTAL OUTPUT, UNEQUAL COUNTRIES, UNSKILLED LABOR, UNSKILLED WORKERS, URBANIZATION, UTILITY FUNCTION, WAGE INCREASE, WAGE EQUALIZATION, WAGE GAINS, WAGE GROWTH, WAGE RATE, WORKER, WORKERS,
Online Access:	http://documents.worldbank.org/curated/en/2006/12/7245823/composition-growth-matters-poverty-alleviation https://hdl.handle.net/10986/8857
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