Severe Poverty and Growth: A Macro-Micro Analysis

Abstract

The first section of this paper reviews the relationship of growth performance, by country and region, to various definitions of poverty and in particular to severe poverty. The second section examines the same question of the varying growth-elasticity of poverty through a micro, case-study lens. Initially it looks at the outliers - those country cases where growth was, and was not, associated with an improvement in the welfare of the poorest. Then it focuses more sharply on specific countries: at this stage, Uganda, where the macro-poverty elasticity was 'orthodox' , and Bolivia, where it was perverse. Within these 'focus countries', the approach is two-part:(i) an examination of the relationship between chronic poverty and growth over the last five to seven years, and how institutions and policies have impinged on this; and (ii) within specific localities, depth interviews with people who have exited and failed to exit from chronic poverty, with a view to understanding what combination of policy, institutional and other factors, in their view and that of other key informants, are responsible for this difference in outcomes. This approach enables us to examine more thoroughly than at macro-level the attitudes and causal processes which are associated with escape and non-escape from poverty. Three themes from the macro-analysis resurface here: (i) the key importance of deepening labour markets in the process of exit from severe poverty - for many of the chronically poor, casual labour income is the only income they have. (ii) The importance of reducing the risks to which the severely poor are exposed. (iii) the importance of smallholder agricultural growth, and services which facilitate this, in sustaining the poverty elasticity. However, we are also able to identify other 'more micro' factors which are associated with the probability of poverty transitions and thence with the poverty elasticity: (iv) At the micro-level, resilience and perseverance in face of adversity are key determinants of exit from poverty. By extension, the availability of facilities which will encourage those afflicted to persevere rather than give up and retreat into subsistence is highly relevant. (v) The importance of complementarities between policies and institutions as means of achieving sustainable exit from extreme poverty. (vi) The potential political importance of 'watching the right poverty indicators'. In short, in many regions and countries, 'growth is not nearly enough' to reduce severe poverty, and this fact has political significance, but we know something about the policy and institutional factors which may enable exit from such poverty. These include appropriate risk-reduction institutions, labour market deepening, agricultural intensification (particularly in Africa), the availability of support networks, and a pro-poor pattern of public expenditure.

Keywords: poverty dynamics, policy growth, Uganda, Africa, Zambia, southern Africa