Is Growth Enough? Macroeconomic Policy and Poverty Reduction

Abstract

The paper investigates the existence of super pro-poor policies--that is, policies that directly influence the income of the poor after accounting for the effect of growth. It uses a dynamic panel estimator to capture both across- and within-country effects, and a Bayesian-type robustness check to account for model uncertainty. The findings confirm that growth raises the income of the poor, although this relationship is less than one-to-one. The analysis also identifies four super pro-poor conditions that are influenced by policy: inflation, government size, educational achievement, and financial development.

Keywords: Economic Growth, Poverty Alleviation, Macroeconomic Policy, Bayesian Analysis

JEL Classification: C33, E61, I32, O57, C11