Growth is Good for the Poor

When average income rises, the average incomes of the poorest fifth of society rise proportionately. This is a consequence of the strong empirical regularity that the share of income accruing to the bottom quintile does not vary systematically with...

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Bibliographic Details
Main Authors:	Dollar, David, Kraay, Aart
Format:	Policy Research Working Paper
Language:	English en_US
Published:	World Bank, Washington, DC 2014
Subjects:	AGRICULTURAL PRODUCTIVITY AGRICULTURE ANNUAL CHANGE ANNUAL GROWTH ANNUAL OBSERVATIONS AVERAGE ANNUAL AVERAGE INCOME AVERAGE INCOMES BENCHMARK CAPITAL CONTROLS CONDITIONAL CONVERGENCE CONSUMPTION COUNTRY EFFECTS COUNTRY-SPECIFIC EFFECTS CRISES CROSS-COUNTRY DIFFERENCES DATA AVAILABILITY DEMOCRACY DEMOCRATIC INSTITUTIONS DEVELOPED COUNTRIES DEVELOPING COUNTRIES DEVELOPMENT RESEARCH DIFFERENCES IN INCOME DISTRIBUTION EFFECT DISTRIBUTION FUNCTION DISTRIBUTIONAL EFFECT DISTRIBUTIONAL EFFECTS DYNAMIC PANEL ECONOMETRIC PROBLEMS ECONOMIC GROWTH ECONOMIC INTEGRATION EDUCATIONAL ATTAINMENT ELASTICITY EMPIRICAL EVIDENCE EMPIRICAL GROWTH LITERATURE EMPIRICAL LITERATURE EMPIRICAL REGULARITY ERROR TERM ERROR TERMS EXCHANGE RATE EXCHANGE RATES EXPENDITURES EXPLANATORY VARIABLE FACTOR ENDOWMENTS FINANCIAL CRISIS FINANCIAL DEVELOPMENT FINANCIAL MARKETS FINANCIAL SECTOR FIXED EFFECTS GDP GDP PER CAPITA GINI COEFFICIENT GROSS INCOME GROWTH EFFECT GROWTH EPISODES GROWTH MODELS GROWTH RATES GROWTH REGRESSIONS GROWTH-POVERTY RELATIONSHIP HEALTH OUTCOMES HETEROSKEDASTICITY HIGH INFLATION HOUSEHOLD INCOME HOUSEHOLD SURVEYS INCOME INCOME DISTRIBUTION INCOME DISTRIBUTION DATA INCOME GROWTH INCOME INEQUALITY INCOME LEVELS INCOME SHARE INCREASE GROWTH INCREASED INEQUALITY INCREASES INFANT MORTALITY INTERNATIONAL OPENNESS INTERNATIONAL TRADE INTERTEMPORAL VARIATION LABOR PRODUCTIVITY LINEAR RELATIONSHIP LIVING STANDARDS LONG RUN LORENZ CURVE MACRO STABILITY MACROECONOMIC POLICIES MACROECONOMIC STABILITY MACROECONOMICS MEAN DIFFERENCES MEAN INCOME MEAN INCOMES MEASUREMENT ERROR NATIONAL ACCOUNTS NATIONAL INCOME NEGATIVE EFFECT NEGATIVE RELATIONSHIP NORMAL DISTRIBUTION 0 HYPOTHESIS OPEN MARKETS PER CAPITA INCOME PER CAPITA INCOMES POINT ESTIMATES POLICY INTERVENTIONS POLICY PACKAGE POLICY RESEARCH POOR COUNTRIES POOR HOUSEHOLDS POOR PEOPLE POSITIVE EFFECT POSITIVE EFFECTS POVERTY HEADCOUNT POVERTY LINE POVERTY RATE POVERTY REDUCTION POVERTY REDUCTION STRATEGY POWER PARITY PRIMARY SCHOOL PRIVATE PROPERTY PRO-POOR PROPERTY RIGHTS PUBLIC INVESTMENT PUBLIC SPENDING PURCHASING POWER PURCHASING POWER PARITY QUALITY STANDARDS REGIONAL DUMMIES RELATIVE INCOMES REVERSE CAUSATION RICH COUNTRIES RULE OF LAW RURAL AREAS SIGNIFICANT EVIDENCE SIGNIFICANT IMPACT SOCIAL SAFETY SOCIAL SAFETY NETS SOCIAL SERVICES SOCIAL SPENDING STANDARD DEVIATION TIME SERIES TRANSITION ECONOMIES WORLD TRADE ORGANIZATION
Online Access:	http://documents.worldbank.org/curated/en/2001/04/1089579/growth-good-poor http://hdl.handle.net/10986/19679

Description
Summary:	When average income rises, the average incomes of the poorest fifth of society rise proportionately. This is a consequence of the strong empirical regularity that the share of income accruing to the bottom quintile does not vary systematically with average income. The authors document this empirical regularity in a sample of 92 countries spanning the past four decades and show that it holds across regions, periods, income levels, and growth rates. The authors next ask whether the factors that explain cross-country differences in the growth rates of average incomes have differential effects on the poorest fifth of society. They find that several determinants of growth--such as good rule of law, opennness to international trade, and developed financial markets--have little systematic effect on the share of income that accrues to the bottom quintile. Consequently, these factors benefit the poorest fifth of society as much as everyone else. Thee is some weak evidence that stabilization from high inflation and reductions in the overall size of government not only increase growth but also increase the income share of the poorest fifth in society. Finally, the authors examine several factors commonly thought to disproportionately benefit the poorest in society, but find little evidence of their effects. The absence of robust findings emphasizes that relatively little is known about the broad forces that account for the cross-country and intertemporal variation in the share of income accruing to the poorest fifth of society.

Growth is Good for the Poor

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