The Growth Elasticity of Poverty: Is Africa Any Different ?

Haoyu Wu, Aziz Atamanov, Tom Bundervoet and Pierella Paci

No 10690, Policy Research Working Paper Series from The World Bank

Abstract: On current trends, the future of global poverty reduction will be determined by Sub-Saharan Africa. Yet even during Sub-Saharan Africa’s period of high economic growth — roughly corresponding to the first decade and a half of the 2000s — the extent to which this growth translated into improved living standards for African households was hotly debated. This paper revisits the issue of Sub-Saharan Africa’s relatively low growth elasticity of poverty using a sample of 575 successive and comparable growth spells between 1981 and 2021. The findings confirm that, even controlling for initial differences in poverty, income levels, and inequality, Sub-Saharan Africa consistently had a significantly lower growth elasticity of poverty relative to other regions over this period. The lower growth elasticity of poverty, which has remained unchanged over time, is due to a lower passthrough between growth in gross domestic product per capita (or growth in household final consumption expenditure as measured by national accounts) and growth in household consumption expenditures as measured from surveys. Given the low passthrough of economic growth to households, Africa thus needs higher rates of economic growth than its peer countries in other regions to achieve equal rates of poverty reduction. Given the challenge of achieving this in the current global economic environment, success in reducing global poverty will require a focused effort to strengthen the effect of aggregate economic growth on household welfare in Sub-Saharan Africa. The results suggest that this will require (i) improved provision of basic education services and basic infrastructure, (ii) faster structural transformation, and (iii) a decrease in the occurrence and persistence of violent conflicts.

Date: 2024-02-01
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