Pro-Growth, Pro-Poor: Is There a Tradeoff?
29 Pages Posted: 20 Apr 2016
Date Written: August 19, 2004
Is a pro-growth strategy always the best pro-poor strategy? To address this issue, Lopez provides an empirical evaluation of the impact of a series of pro-growth policies on inequality and headcount poverty. He relies on a large macroeconomic data set and estimate dynamic panel models that allows him to differentiate between the short- and long-run impacts of the policies under consideration on growth, inequality, and poverty. The author's findings indicate that regardless of their impact on inequality, pro-growth policies lead to lower poverty levels in the long run. However, he also finds evidence indicating that some of these policies may lead to higher inequality and, under plausible assumptions for the distribution of income, to higher poverty levels in the short run. These findings would justify the adoption of a pro-growth policy package as the center of any poverty reduction strategy, together with pro-poor measures that complement such a package by offsetting potential short-run increases in poverty.
This paper - a product of the Poverty Reduction Group, Poverty Reduction and Economic Management Network - is part of a larger effort in the network to understand how to increase the impact of growth on poverty reduction.
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