Twinning the Goals: How Can Promoting Shared Prosperity Help to Reduce Global Poverty?

29 Pages Posted: 20 Apr 2016 Last revised: 27 Apr 2018

See all articles by Christoph Lakner

Christoph Lakner

World Bank - Development Research Group (DECRG); University of Oxford - Department of Economics

Mario Negre

Deutsches Institut für Entwicklungspolitik - German Development Institute (DIE/GDI); World Bank Research Group

Espen Beer Prydz

World Bank - Development Research Group (DECRG)

Mario Negre Rossignoli

Deutsches Institut für Entwicklungspolitik (DIE) - German Development Institute (DIE)

Date Written: November 1, 2014

Abstract

In 2013, the World Bank adopted two goals: First, reduce global extreme poverty to 3 percent by 2030. Second, promote shared prosperity defined as the income growth of the bottom 40 percent of the population within a country. This paper simulates the global poverty headcount under three growth scenarios for the bottom 40 percent up to 2030. The analysis deploys a set of "shared prosperity premiums," in which the bottom 40 percent in each country grows at a differential rate from the projected growth in the mean. With no distributional change, the global headcount reaches between 6.7 and 4.7 percent in 2030, depending on the average growth scenario used for the simulations. However, if the incomes of the bottom 40 percent grow 2 percentage points faster than the mean, the World Bank's poverty goal is achieved with the global poverty falling to below 3 percent in 2030 in the scenarios which average growth rates are extrapolated from the early 2000s. While such a "shared prosperity premium" is not unprecedented in recent growth spells, maintaining it over 20 years in every country is optimistic. The paper shows that in the baseline growth scenario, the global poverty rate could either reach the 3 percent target, or be close to 10 percent, depending on the "shared prosperity premium."

Keywords: Inequality, Achieving Shared Growth, Pro-Poor Growth, Equity and Development, Economic Growth, Industrial Economics, Economic Theory & Research, Adaptation to Climate Change

Suggested Citation

Lakner, Christoph and Negre, Mario and Prydz, Espen Beer and Negre Rossignoli, Mario, Twinning the Goals: How Can Promoting Shared Prosperity Help to Reduce Global Poverty? (November 1, 2014). World Bank Policy Research Working Paper No. 7106, Available at SSRN: https://ssrn.com/abstract=2524160

Christoph Lakner (Contact Author)

World Bank - Development Research Group (DECRG) ( email )

1818 H. Street, N.W.
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HOME PAGE: http://www.worldbank.org/en/about/people/christoph-lakner

University of Oxford - Department of Economics

Manor Road Building
Manor Road
Oxford, OX1 3BJ
United Kingdom

Mario Negre

Deutsches Institut für Entwicklungspolitik - German Development Institute (DIE/GDI) ( email )

Tulpenfeld 4
Bonn, 53113
Germany

World Bank Research Group ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

Espen Beer Prydz

World Bank - Development Research Group (DECRG) ( email )

1818 H. Street, N.W.
MSN3-311
Washington, DC 20433
United States

HOME PAGE: http://www.worldbank.org/en/about/people/espen-beer-prydz

Mario Negre Rossignoli

Deutsches Institut für Entwicklungspolitik (DIE) - German Development Institute (DIE) ( email )

Tulpenfeld 4
Bonn, 53113
Germany

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