Is Economic Growth Good for the Poor? Tracking Low Incomes Using General Means

Abstract

We propose the use of an alternative methodology to track low incomes based on Atkinson's equally distributed equivalent income functions or general means and present a new characterization to justify their application. To evaluate the effects of growth on lower incomes, growth rates are compared for two income standards: the ordinary mean and a low-income-sensitive general mean. The question is: How closely related are these two variables? After estimating the growth elasticity, we find that it is not significantly different from zero. Thus, it cannot be concluded that poorer incomes grow proportionately to increases in the average income.