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

40 Pages Posted: 21 Apr 2011

See all articles by James E. Foster

James E. Foster

George Washington University

Miguel Székely

Center for Education and Social Studies

Multiple version iconThere are 2 versions of this paper

Date Written: June 2001

Abstract

In this paper we propose the use of an alternative methodology to track low incomes based on Atkinson`s (1970) family of "equally distributed equivalent income" functions, which are called "general means" here. We provide a new characterization of general means that justifies their use in this context. Our method of evaluating the effects of growth on poor incomes is based on a comparison of growth rates for two standards of living: the ordinary mean and a bottom-sensitive general mean. The motivating question is: To what extent is growth in the ordinary mean accompanied by growth in the general mean? A key indicator in this approach is the growth elasticity of the general mean, or the percentage change in the general mean over the percentage change in the usual mean. Our empirical analysis estimates this growth elasticity for a data set containing 144 household surveys from 20 countries over the last quarter century. Among other results, we find that the growth elasticity of bottom sensitive general means is positive, but significantly smaller than one. This suggests that the incomes of the poor do not grow one-for-one with increases in average income.

Suggested Citation

Foster, James E. and Székely, Miguel, Is Economic Growth Good for the Poor? Tracking Low Incomes Using General Means (June 2001). IDB Working Paper No. 380, Available at SSRN: https://ssrn.com/abstract=1817251 or http://dx.doi.org/10.2139/ssrn.1817251

James E. Foster (Contact Author)

George Washington University ( email )

2121 I Street NW
Washington, DC 20052
United States

Miguel Székely

Center for Education and Social Studies ( email )

Mexico City
Mexico

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