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Pro-poor, pro-growth

New work by Dollar, Kleineberg and Kraay confirms that pro-growth economic policy remains the best advice for helping the world’s poor. They find that, over the past four decades, growth in incomes for the poorest is largely driven by national economic growth.

Moreover, across a wide array of other macroeconomic policies, they cannot really find anything that disproportionately improves outcomes for the poorest:

Overall, these results suggest that a large set of plausible macro variables are remarkably unsuccessful in explaining growth in the income share of the poorest 20 and 40 percent. This finding in turn implies that historical experience in a large sample of countries does not provide much guidance on which combinations of macroeconomic policies and institutions might be particularly beneficial for promoting “shared prosperity” as distinct from simply “prosperity”.

They conclude:

From the perspective of promoting “shared prosperity”, the findings of this paper convey both good news and bad news. The good news is that institutions and policies that promote economic growth in general will on average raise incomes of the poor equiproportionally, thereby promoting “shared prosperity”. The bad news is that, in choosing among macroeconomic policies, we do not find robust evidence that certain policies are particularly “pro-poor” or conducive to promoting “shared prosperity” other than through their direct effects on overall economic growth.

Our recent report on the case for economic growth reached similar conclusions.

HT: @TrevorTombe

About Eric Crampton (87 Articles)
I'm Head of Research with the New Zealand Initiative.

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