Why Don’t We See Poverty Convergence?

Why Don’t We See Poverty Convergence?

We are not seeing faster progress against poverty amongst the poorest developing countries. Yet this is implied by widely accepted "stylized facts" about the development process. The paper tries to explain what is missing from those stylized facts. Consistently with models of economic growth incorporating borrowing constraints, the analysis of a new data set for 100 developing countries reveals an adverse effect on consumption growth of high initial poverty incidence at a given initial mean. A high incidence of poverty also entails a lower subsequent rate of progress against poverty at any given growth rate (and poor countries tend to experience less steep increases in poverty during recessions). Thus, for many poor countries, the growth advantage of starting out with a low mean ("conditional convergence") is lost due to their high poverty rates. The size of the middle class--measured by developing-country, not Western, standards--appears to be an important channel linking current poverty to subsequent growth and poverty reduction. However, high current inequality is only a handicap if it entails a high incidence of poverty relative to mean consumption.

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Bibliographic Details
Main Author: Ravallion, Martin
Format: Policy Research Working Paper biblioteca
Language:English
Published: 2009-06-01
Subjects:ABSOLUTE POVERTY, ABSOLUTE TERMS, ABSOLUTE VALUE, ADVERSE EFFECTS, AGGREGATE GROWTH, AGGREGATE INEQUALITY, AGGREGATE MEASURE, AGGREGATE OUTPUT, ANNUALIZED CHANGE, CONDITIONAL CONVERGENCE, CONSUMER DEMAND, CONSUMPTION GROWTH, CONSUMPTION PER CAPITA, CONVERGENCE PARAMETER, CONVERGENCE TESTS, COUNTRY LEVEL, CREDIT MARKET, CUMULATIVE DISTRIBUTION, CUMULATIVE DISTRIBUTION FUNCTION, CURRENT POVERTY, DATA COMPILATIONS, DATA SET, DATA SETS, DECREASING FUNCTION, DEPENDENT VARIABLE, DESCRIPTIVE STATISTICS, DEVELOPED COUNTRIES, DEVELOPING COUNTRIES, DEVELOPING COUNTRY, DEVELOPING WORLD, DEVELOPMENT ECONOMICS, DEVELOPMENT GOALS, DEVELOPMENT REPORT, DEVELOPMENT RESEARCH, DIMINISHING RETURNS, DISTRIBUTIONAL EFFECT, DISTRIBUTIVE POLITICS, ECONOMETRIC ANALYSIS, ECONOMIC CONTRACTION, ECONOMIC DEVELOPMENT, ECONOMIC GROWTH, ECONOMIC INEQUALITY, ECONOMIC LITERATURE, ECONOMIC PERFORMANCE, ECONOMIC RESEARCH, ECONOMIC REVIEW, ECONOMIC STUDIES, ECONOMICS, ECONOMICS LETTERS, EMPIRICAL LITERATURE, EMPIRICAL RELATIONSHIP, EMPIRICAL SUPPORT, ERROR TERM, EXPLANATORY POWER, FINANCIAL CRISIS, FINANCIAL SECTOR, FIXED EFFECTS, FUNCTIONAL FORM, GINI INDEX, GROWTH DETERMINANTS, GROWTH ELASTICITY, GROWTH EMPIRICS, GROWTH MODEL, GROWTH PRO-POOR, GROWTH PROCESS, GROWTH PROSPECTS, GROWTH RATE, GROWTH RATES, GROWTH REGRESSION, GROWTH REGRESSIONS, HIGH INEQUALITY, HIGH INEQUALITY COUNTRIES, HIGH POVERTY, HIGHER INCIDENCE OF POVERTY, HIGHER INEQUALITY, HOUSEHOLD CONSUMPTION, HOUSEHOLD SURVEYS, HUMAN CAPITAL, HUMAN DEVELOPMENT, INCIDENCE OF POVERTY, INCOME DISTRIBUTION, INCOME INEQUALITY, INCOME POVERTY, INCOME SHARE, INDUSTRIALIZED COUNTRIES, INEQUALITY EFFECT, INEQUALITY INDEX, INEQUALITY MEASURE, INTEREST RATE, LIFE EXPECTANCY, LOG GINI, LOG-NORMAL DISTRIBUTION, LOW INCOMES, LOW POVERTY RATES, MACROECONOMICS, MALNUTRITION, MARGINAL PRODUCT, MARKET ECONOMIES, MARKET FAILURES, MEAN CONSUMPTION, MEAN ERROR TERM, MEAN INCOME, MEASUREMENT ERROR, MEASUREMENT ERRORS, MEASURING POVERTY, MEDIAN POVERTY, MICRO DATA, MIDDLE CLASS, MIDDLE CLASS CONSENSUS, MIDDLE QUINTILES, MINIMUM LEVEL, NATIONAL ACCOUNTS, NATIONAL POVERTY, NATIONAL POVERTY LINES, NEGATIVE COEFFICIENT, NEGATIVE COEFFICIENTS, NEGATIVE CORRELATION, NEGATIVE EFFECT, NEGATIVE IMPACT, NEGATIVE SIGN, NEOCLASSICAL GROWTH, NEW GROWTH THEORIES, OLD ISSUES, POLICY CONVERGENCE, POLICY IMPLICATIONS, POLICY ISSUES, POLICY REFORMS, POLICY RESEARCH, POLITICAL ECONOMY, POOR COUNTRIES, POOR COUNTRY, POPULATION SHARE, POSITIVE CORRELATION, POSITIVE EFFECT, POVERTY GAP, POVERTY GAP INDEX, POVERTY INCIDENCE, POVERTY LINE, POVERTY LINES, POVERTY MEASURE, POVERTY MEASURES, POVERTY RATE, POVERTY RATES, POVERTY REDUCTION, POVERTY TRAPS, POWER PARITY, PRIMARY SCHOOL ENROLMENT, PRIVATE CONSUMPTION, PRODUCTION FUNCTION, PROMOTING GROWTH, PUBLIC GOODS, REDUCING POVERTY, REGIONAL DUMMY, REGIONAL EFFECTS, RELATIVE DISTRIBUTION, RELATIVE POVERTY, SAVINGS, SCHOOLING, SECONDARY SOURCES, SECTORAL COMPOSITION, SENSITIVITY ANALYSIS, SERIAL CORRELATION, SIGNIFICANT EFFECT, SIGNIFICANT NEGATIVE, STANDARD DEVIATION, SUBSISTENCE, TRANSITION COUNTRIES, UNEMPLOYMENT, URBAN AREAS, WEALTH DISTRIBUTION, WELFARE INDICATOR,
Online Access:http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20110407140818
http://hdl.handle.net/10986/4352
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Summary:We are not seeing faster progress against poverty amongst the poorest developing countries. Yet this is implied by widely accepted "stylized facts" about the development process. The paper tries to explain what is missing from those stylized facts. Consistently with models of economic growth incorporating borrowing constraints, the analysis of a new data set for 100 developing countries reveals an adverse effect on consumption growth of high initial poverty incidence at a given initial mean. A high incidence of poverty also entails a lower subsequent rate of progress against poverty at any given growth rate (and poor countries tend to experience less steep increases in poverty during recessions). Thus, for many poor countries, the growth advantage of starting out with a low mean ("conditional convergence") is lost due to their high poverty rates. The size of the middle class--measured by developing-country, not Western, standards--appears to be an important channel linking current poverty to subsequent growth and poverty reduction. However, high current inequality is only a handicap if it entails a high incidence of poverty relative to mean consumption.

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