Research Series No. 23 - The Effect of the Sectoral Composition of Economic Growth on Rural and Urban Poverty

IFAD RESEARCH SERIES 23, ISBN: 978-92-8072-816-0, 2018

42 Pages Posted: 11 Dec 2018 Last revised: 31 Jul 2019

See all articles by Rui S Benfica

Rui S Benfica

International Fund for Agricultural Development (IFAD)

Heath Henderson

Drake University

Multiple version iconThere are 2 versions of this paper

Date Written: November 15, 2018

Abstract

We examine the relationship between the sectoral composition of economic growth and the rural-urban composition of poverty. To this end, we use a new cross-country panel dataset consisting of 146 rural and urban poverty “spells” for 70 low- and middle-income countries. We find that rural (urban) poverty is highly responsive to agricultural (non-agricultural) productivity growth. The effect of agricultural productivity growth on rural poverty is particularly strong for countries with little dependence on natural resources. We also find that growth in the share of employment in the non-agricultural sector (i.e. structural transformation) reduces rural poverty, most notably for countries at a low initial level of development. These findings are robust to changes in key assumptions, including using alternative poverty lines. Finally, we use our estimates to examine the historical contribution of different sources of economic growth to rural and urban poverty reduction across regions.

Keywords: Poverty, Economic growth, Urban development, Productivity, Employment

Suggested Citation

Benfica, Rui S and Henderson, Heath, Research Series No. 23 - The Effect of the Sectoral Composition of Economic Growth on Rural and Urban Poverty (November 15, 2018). IFAD RESEARCH SERIES 23, ISBN: 978-92-8072-816-0, 2018, Available at SSRN: https://ssrn.com/abstract=3285038

Rui S Benfica (Contact Author)

International Fund for Agricultural Development (IFAD) ( email )

Via Paolo di Dono
Rome, 00142
Italy

Heath Henderson

Drake University ( email )

2507 University Avenue
Des Moines, IA 50311-4505
United States

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