Poverty accounting

Research output: Contribution to journalArticleAcademicpeer-review

Abstract

This paper proposes a new framework for poverty accounting, that is, the decomposition of poverty into its proximate components. Using aggregated household surveys from 124 countries, we estimate the potential impacts of income growth and redistribution on poverty rates, as well as their actual contributions to poverty reduction over the period from 1981 to 2010. Our fractional response approach shows that the potential impacts are highly non-linear and differ across regions and time. This non-linearity and variation need to be taken into account if empirical estimates are to inform development policy. Although historically growth has played the main role in poverty reduction, we find that initial inequality is a strong moderator of the impact of growth. In fact, there has been a shift towards pro-poor growth around the turn of the millennium, both at the $2 and at the $1.25 a day poverty line. Nevertheless, our projections of poverty rates until 2030 show that the end of extreme poverty within a generation, as put forth in the Sustainable Development Goals, is unlikely to materialize. (C) 2018 Elsevier B.V. All rights reserved.

Original languageEnglish
Pages (from-to)237-255
Number of pages19
JournalEuropean Economic Review
Volume104
DOIs
Publication statusPublished - 1 May 2018

Keywords

  • Poverty
  • Inequality
  • Growth
  • Fractional response models
  • FRACTIONAL RESPONSE VARIABLES
  • GROWTH ELASTICITY
  • PRO-POOR
  • INEQUALITY
  • COUNTRIES
  • DECOMPOSITION
  • REDUCTION
  • WELFARE
  • IMPACT
  • INCOME

Cite this

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title = "Poverty accounting",
abstract = "This paper proposes a new framework for poverty accounting, that is, the decomposition of poverty into its proximate components. Using aggregated household surveys from 124 countries, we estimate the potential impacts of income growth and redistribution on poverty rates, as well as their actual contributions to poverty reduction over the period from 1981 to 2010. Our fractional response approach shows that the potential impacts are highly non-linear and differ across regions and time. This non-linearity and variation need to be taken into account if empirical estimates are to inform development policy. Although historically growth has played the main role in poverty reduction, we find that initial inequality is a strong moderator of the impact of growth. In fact, there has been a shift towards pro-poor growth around the turn of the millennium, both at the $2 and at the $1.25 a day poverty line. Nevertheless, our projections of poverty rates until 2030 show that the end of extreme poverty within a generation, as put forth in the Sustainable Development Goals, is unlikely to materialize. (C) 2018 Elsevier B.V. All rights reserved.",
keywords = "Poverty, Inequality, Growth, Fractional response models, FRACTIONAL RESPONSE VARIABLES, GROWTH ELASTICITY, PRO-POOR, INEQUALITY, COUNTRIES, DECOMPOSITION, REDUCTION, WELFARE, IMPACT, INCOME",
author = "Richard Bluhm and {de Crombrugghe}, Denis and Adam Szirmai",
note = "Data sources : - The World Bank's PovcalNet database - The World Bank's World Development Indicators (WDI) - Penn World Tables 7.1 (PWT 7.1) - The World Bank's Health, Nutrition and Population Statistics database.",
year = "2018",
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journal = "European Economic Review",
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Poverty accounting. / Bluhm, Richard; de Crombrugghe, Denis; Szirmai, Adam.

In: European Economic Review, Vol. 104, 01.05.2018, p. 237-255.

Research output: Contribution to journalArticleAcademicpeer-review

TY - JOUR

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