Growth and Poverty Reduction: An Empirical Analysis

This paper develops an inequality-growth trade off index, which shows how much growth is needed to offset the adverse impact of an increase in inequality on poverty. The empirical analysis based on this index shows that pro-poor policies will have a greater payoff for poverty reduction in Thailand, while growth-maximizing policies may be more adequate for Korea and Lao PDR. For the Philippines, a mixture of growth and pro-poor policies may be deemed as adequate. Further, the paper shows that countries with low initial inequality will have a greater poverty reduction payoff from growth, whereas countries with high initial inequality will have a greater poverty reduction payoff from pro-poor policies. Finally, the paper suggests that if our focus is on ultra poverty, then pro-poor policies would be of greater benefit.