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The composition of growth matters for poverty alleviation

Norman Loayza () and Claudio Raddatz

No 4077, Policy Research Working Paper Series from The World Bank

Abstract: This paper contributes to explain the cross-country heterogeneity of the poverty response to changes in economic growth. It does so by focusing on the structure of output growth. The paper presents a two-sector theoretical model that clarifies the mechanism through which the sectoral composition of growth and associated labor intensity can affect workers'wages and, thus, poverty alleviation. Then it presents cross-country empirical evidence that analyzes first, the differential poverty-reducing impact of sectoral growth at various levels of disaggregation, and the role of unskilled labor intensity in such differential impact. The paper finds evidence that not only the size of economic growth but also its composition matters for poverty alleviation, with the largest contributions from labor-intensive sectors (such as agriculture, construction, and manufacturing). The results are robust to the influence of outliers, alternative explanations, and various poverty measures.

Keywords: Achieving Shared Growth; Population Policies; Economic Growth; Rural Poverty Reduction; Labor Markets (search for similar items in EconPapers)
Date: 2006-12-01
New Economics Papers: this item is included in nep-dev
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Journal Article: The composition of growth matters for poverty alleviation (2010) Downloads
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