Is Growth Enough Macroeconomic strongPolicystrong and Poverty Reduction.pdf

Is Growth Enough? Macroeconomic Policy and Poverty Reduction∗ Charalambos G. Tsangarides Dhaneshwar Ghura George Washington University International Monetary Fund cgt@gwu.edu dghura@imf.org Carlos A. Leite International Monetary Fund cleite@imf.org October 2000 Abstract This paper provides an empirical investigation of the poverty-growth nexus and assesses the prospects for poverty alleviation through economic growth. The paper employs a dynamic panel estimator to capture both across- and within-country effects, a novel Bayesian Model Averaging ro- bustness analysis to explicitly account for model uncertainty, and the widest possible set of potential determinants to ensure a comprehensive search for super pro-poor policies. The empirical findings are broadly en- couraging. Growth does indeed raise the income of the poor, although this relationship is less than one-to-one, in sharp contrast with previous results. One implication is that simply focusing on economic growth as a strategy to lower poverty may actually leave the poor worse offrelative to the average population. More encouraging is the evidence on the existence of a set of policies and conditions which are super pro-poor, namely lower inflation, lower government consumption, higher levels of financial sector development and higher educational status. ∗A previous version of this paper appeared as IMF Working Paper No. 02/118. The views expressed in this paper are those of the authors and do not necessarily represent t