Promote Pro Poor Economic Growth Essay

1023 words - 5 pages

An on-going discussion that has drawn much attention since the adoption of the Millennium Development Goals (MDG) is the theme of poverty reduction. According to such a policy there is a growing need for developing countries to achieve a sustained rate of growth. However, since purely economic growth strategies may not necessarily elevate poverty and anti-poverty measures may not lead to an increase in growth, it has highlighted the need of an alternative approach that at the same time would benefit the poor and lead to an increase in economic growth. This has paved the way for the concept of ‘pro-poor’ growth, which interlinks growth, poverty and inequality. In terms of measuring it ...view middle of the document...

When defining the term poor a general consensus is reached among academics that it is those whose income falls below the poverty line and it is commonly measured by the head count ratio (Fields, 1989). To be more precise poverty can be defined in absolute terms, the difficultly to meet basic needs i.e. food, shelter and security or in relative terms, were comparably to the rich the poor are worse off. Therefore, when defining Pro-Poor growth there has been a debate on whether it should take an absolute position or a relative position.

The absolute position of pro-poor growth takes into account only the incomes of poor people. It focuses on the rate of poverty reduction and on the condition that it is deliberated in terms of purchasing power of commodities, as it can be seen as pro poor growth if in aggregate the poor are better off (Khandker & Koolwal, 2006). However, in relative terms since income inequality has not been taken into account they would be worse off. The poor may increase their income by $5 whereas; the rich may have a $1000 increase in their income, this is still seen as an absolute growth, however proportionately the rich are better off. Evidently, it can be said the poor marginally benefitted from the growth however, were relatively worse off since the income is unequally distributed.

The relative stance compares changes of the income of the poor with changes of income of the non-poor. Growth will be pro poor if the share of income of the poor accelerates at a faster rate of growth then the non-poor. Essentially if income is distributed more equally in proportion to the overall income it can be classified as pro poor growth (Khandker & Koolwal, 2006). As stated by White and Anderson (2001) this is known as a measure of “inequality reducing” (White & Anderson, 2001). For example, a country would prefer an outcome of the average income of growth of the poor to grow by 5% whereas the average incomes of household to growth at 3%. Rather then a scenario were the average income of households grew by 8% compared to average growth of poor households...

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