There Is Poverty Convergence

10 Pages Posted: 21 Jan 2016

See all articles by Jesus Crespo Cuaresma

Jesus Crespo Cuaresma

Vienna University of Economics and Business

Stephan Klasen

University of Goettingen (Gottingen) - Faculty of Economics and Business Administration; CESifo (Center for Economic Studies and Ifo Institute); IZA Institute of Labor Economics

Konstantin M. Wacker

University of Groningen - Faculty of Economics and Business

Date Written: January 1, 2016

Abstract

Martin Ravallion ("Why Don't We See Poverty Convergence?" American Economic Review, 102(1): 504-23; 2012) presents evidence against the existence of convergence in global poverty rates despite convergence in household mean income levels and the close linkage between income growth and poverty reduction. We show that this finding is driven by a specification that demands more than simple convergence in poverty headcount rates and assumes a growth elasticity of poverty reduction, which is well-known to accelerate with low initial poverty levels. If we motivate the poverty convergence equation using an arguably superior growth semi-elasticity of poverty reduction, we find highly significant and robust evidence of convergence in absolute poverty headcount ratios and poverty gaps. Relatedly, we show that the results in Ravallion (2012) are driven by the special income growth and poverty dynamics in Central and Eastern European transition economies that started with low initial poverty rates and thus observed a high elasticity of poverty reduction. Once we control for their abnormal poverty dynamics, we again find robust evidence of global convergence in poverty, even in the original specification by Ravallion (2012).

Keywords: poverty convergence, economic growth, poverty trap, transition economies

JEL Classification: I32, D31, P36

Suggested Citation

Crespo Cuaresma, Jesus and Klasen, Stephan and Wacker, Konstantin M., There Is Poverty Convergence (January 1, 2016). Available at SSRN: https://ssrn.com/abstract=2718720 or http://dx.doi.org/10.2139/ssrn.2718720

Jesus Crespo Cuaresma

Vienna University of Economics and Business ( email )

Welthandelsplatz 1
Vienna, Wien 1020
Austria

Stephan Klasen

University of Goettingen (Gottingen) - Faculty of Economics and Business Administration ( email )

Platz der Goettinger Sieben 3
Goettingen, 37073
Germany
+49-551-397303 (Phone)
+49-551-397302 (Fax)

HOME PAGE: www.vwl.wiso.uni-goettingen.de/klasen.html

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Konstantin M. Wacker (Contact Author)

University of Groningen - Faculty of Economics and Business ( email )

Postbus 72
9700 AB Groningen
Netherlands

HOME PAGE: http://sites.google.com/rug.nl/kmwacker

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