Growth and Poverty Flashcards
What was the aim of Dollar and Kraay’s paper? (2002)
To find what is the link between poverty and average income growth?
What data did Dollar and Kraay (2002) use?
92-137 different countries, PPP GDP at 1985 USD covering 4 decades?
What were Dollar and Kraay’s criticisms?
1) Definition of Poverty (bottom 20% of income distribution)
2) Omitted variable bias
3) Measurement errors/poor quality data
4) Correlation NOT causality - could be reverse causality?
What did beta represent in Dollar and Kraay (2002)?
Elasticity
What did Dollar and Kraay (2002) find?
There was a one-to-one relationship between incomes per capita of the poor and the general population - both in levels and growth.
What were the implications of Dollar and Kraay (2002)?
Growth has no impact on distribution and simply shifts KC so that poverty decreases with growth. No ‘trickle-down’ effect, poor benefit directly from growth.
How did Dollar and Kraay (2002) check the robustness of their results?
Adding regional/time dummies and the level of development. Testing to see if growth enhancing institutions (openness to trade, macroeconomic stability, strong property rights) or pro-poor policies (primary education and health spending, formal democratic institutions) were the cause of the rise in lower shares incomes. Result remained, they benefit all quintiles equally and growth DIRECTLY helps poor, not through any of these channels.
How did Bourguigon (2004) define poverty?
Absolute terms.
What did Bourguigon (2004) claim?
There was a growth effect (shift) and a distribution effect (shape). The key is to work out what impact growth has on inequality - otherwise it is unclear the effect.
How did Dollar, Kraay and Kleinburg (2016) address their previous criticisms?
1) They used household survey rather than national accounts - better data source
2) They defined poverty and both bottom 20% income AND bottom 40% of income
What were Dollar, Kraay and Kleinburg’s (2016) findings?
The share of income to the poor didn’t change with growth, so alpha = 1.
What was seen during Dollar, Kraay and Kleinburg’s (2016) robustness checks?
1) When including regional dummies, results stayed the same other than for East-Asia pacific regions where alpha<1
2) When including time dummies results held other than in the 1980s where alpha<1
3) Household surveys gave the same results
What are the cautions of Dollar, Kraay and Kleinburg’s (2016) results?
1) Definition of poverty (again)
2) Sensitive to how growth is calculated, if there are higher initial levels of inequality, growth improves incomes of the poor less than others
3) Policy variable unimportant
