Growth and Poverty

Question 1

What does the Dollar, Kraay and Kleinberg paper (2016) look at

Answer 1

‘Growth is still good for the poor’

-Using improved data they revisit they 2002 paper about the link between poverty and growth.

Question 2

What is the improved data they use in the 2016 paper?

Answer 2

• 121 countries
• Based on household surveys
• covers 4 decades

Question 3

What are the four key findings of the Dollar, Kraay and Kleinberg 2016 paper?

Answer 3

1. Growth is still good for the poor
2. In the bottom 40%, up to 80% of their variation in income is due to growth
3. In the bottom 20%, up to 61% of their variation in income is due to growth
4. Robustness of the one-to-one relationship, to the inclusion on:
   a. Regional dummies (except Asia and pacific)
   b. time dummies (except in 1980s)
   c. Household surveys vs national accounts

Question 4

What are the 2 conclusions of the Dollar, kraay and Kleinberg 2016 paper?

Answer 4

1. Higher the initial level of inequality, less the positive impact growth has on the poor
2. Policy variables are not important

Question 5

What was the research questions of Dollar and Kraay 2002 paper? (2)

Answer 5

1. What is the link between poverty and average income?

2. What other factors affect poverty besides income?

Question 6

How do Dollar and Kraay define poverty in their 2002 paper and why was this an issue?

Answer 6

They define poverty as the bottom 20% of the income distribution.
This become their biggest criticism. if you change this figure, the results do not hold.

Question 7

What are the main results of the Dollar, Kraay paper? (2)

Answer 7

1. B=1.07
   - The average incomes of the poor rise one to one with average income
2. alpha = 1.19
   - Average income of the poor rise one to one with growth in average income

Question 8

What are the two main findings Dollar and kraay get from their results 2002 paper?

Answer 8

1. there is no systematic relationship between income and distribution. Hence there is KC curve
2. There is no relationship between growth and inequality

Question 9

To test for robustness, what did DK 2002 try specification with? (4)

Answer 9

• regional dummies
• time dummies
• level of development
• crisis

Question 10

What are the conclusions from DK 2002? (3)

Answer 10

1. Economic growth is a key player in the reduction of poverty
2. Private property rights, macroeconomic stability, fiscal discipline and openness to trade benefit the poor equally.
3. The poor benefit directly, not through a trickle down process

Question 11

What are the cautions or the DK results in 2002? (4)

Answer 11

1. Measurement errors and poor quality of data
2. The regression indicates partial correlations and not causality.
   - Is growth effecting income of the poor or is it the other way around?
3. Omitted variable bias
4. Problematic definition of poverty

Question 12

What was the conclusion of Bourguignon 2004

Answer 12

Poverty can be decomposed into a ‘growth effect’ and a ‘distribution effect’

Question 13

What the the two key conclusions of the Bourguignon 2004 paper?

Answer 13

1. The key challenge is establishing a ‘development strategy’ for reducing poverty lies in the interaction between distribution and growth.
2. higher the initial level of inequality, less the positive impact growth has on the poor.