Does Economic Growth reduce Poverty? : An Empirical Analysis of the Relationship between Poverty and Economic Growth across Low- and Middle-income Countries, illustrated by the Case of Brazil

Extreme poverty is a reality facing over a billion people, and a striking contradiction is that huge disparities coexist with a relatively rapid economic growth. This thesis investigates whether economic growth reduces poverty. Through an empirical cross-sectional regression, it analyses what impact economic growth has on poverty, and what structures that possibly preserve these phenomena. The theories of Dual Economy and Human Capital are used to explain such structures that cause poverty to coexist with growth. Brazil is an example of a dual economy whose recent history is characterised by successful economic and public policies that have managed to reduce the level of extreme poverty. Structures of dualistic labour markets contribute to the preservation of the extreme poverty, thus they do have some explanatory power of the coexistence of poverty and growth. The main conclusion from the empirical results is that economic growth does indeed reduce poverty. Also the level of poverty is strongly related to decrease of poverty, in such a way that a high level of poverty is associated to a slow decrease of poverty. However, economic growth does not appear to be sufficient a tool when the level of extreme poverty is high, suggesting that well-designed policies and investments in education are needed to obtain an inclusive, pro-poor growth and thus reduce the level of extreme poverty.