The composition of growth matters for poverty alleviation

By Norman V. Loayza, Claudio E. Raddatz. 2006

479 citations recorded by the source corpus.

This paper contributes to explain the cross-country heterogeneity of the poverty response to changes in economic growth. It does so by focusing on the structure of output growth. The paper presents a two-sector theoretical model that clarifies the mechanism through which the sectoral composition of growth and associated labor intensity can affect workers' wages and, thus, poverty alleviation. Then it presents cross-country empirical evidence that analyzes first, the differential poverty-reducing impact of sectoral growth at various levels of disaggregation, and the role of unskilled labor intensity in such differential impact. The paper finds evidence that not only the size of economic growth but also its composition matters for poverty alleviation, with the largest contributions from labor-intensive sectors (such as agriculture, construction, and manufacturing). The results are robust to the influence of outliers, alternative explanations, and various poverty measures.

Subfields: Economics and Econometrics, Sociology and Political Science

View Paper: https://www.semanticscholar.org/paper/430b8cc4a3e90503e03dada2f42192902f041e50

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Citations in the corpus

Poverty Reduction without Economic Growth? Explaining Brazil's Poverty Dynamics, 1985-2004 (2007, background): “And cross-country evidence also suggests that rates of poverty reduction depend on the sectoral composition of economic growth (Loayza and Raddatz, 2006; Christiaensen and Demery, 2007).”
Is Green Growth Good for the Poor? (2014, background): “The higher the growth of labor demand, especially for the lower-skilled labor with which the poor are largely endowed, and the more the poor are able to respond to it via sectoral and spatial mobility, the faster poverty is reduced in the face of growth (Loayza and Raddatz 2010).”
Economic Importance of Agriculture for Poverty Reduction (2010, background): “While most empirical studies show that agricultural growth is relatively more important than growth in other sectors there are exceptions, underscoring the existence of potentially important differences in the sectoral GDP elasticities of poverty across countries, depending on the structure and inst”
Economic development, structural change, and women’s labor force participation: (2013, unknown): “…accounting identity that shows how changes in the female employment rate are related to sector-specific growth in value added (see Ravallion and Datt 1996; Loayza and Raddatz 2010; Christiaensen et al. 2011 for a similar approach in relating changes in poverty to sectoral value-added growth).”
What Drives the Global Land Rush? (2011, unknown): “The exceptionally large poverty elasticity of growth in smallholder agriculture (Ligon and Sadoulet 2011, Loayza and Raddatz 2010), as demonstrated in recent rapid poverty reduction in Asian economies such as China, and the fact that the majority of the poor still live in rural areas have led many…”
Understanding the Relationship between Economic Growth, Employment and Poverty Reduction * (2009, background): “Studies have demonstrated that the sectoral pattern of growth will affect the extent of poverty reduction: Loayza and Raddatz (2006) find that growth in unskilled intensive sectors contributes to poverty reduction; Satchi and Temple (2006) find that growth in agriculture may increase poverty while g”
Agriculture and Development: A Brief Review of the Literature (2011, unknown): “Similarly, Self and Grabowski (2007) establish a positive relation between different measures of agricultural productivity and average growth of real GDP per capita over 1960–1995 for a cross-section of countries.”
Beyond Agriculture Versus Non-Agriculture: Decomposing Sectoral Growth–Poverty Linkages in Five African Countries (2016, background): “Consistent with Loayza and Raddatz (2010), we find that the distribution of the benefits of growth is determined by the factor intensity of production and the factor endowments of households.”
A Quality of Growth Index for Developing Countries: A Proposal (2014, unknown): “…the various aspects of growth and how they matter (e.g., Berg et al. 2008; Johnson et al. 2007 on growth sustainability; Badinger 2010; Ramey and Ramey 1995 on growth volatility; Loayza and Raddatz 2010 on sectoral aspects of growth and poverty reduction; Yang 2008 on outward orientation etc.).”
Informality in Latin America and the Caribbean (2009, background): “[10] Loayza, Norman and Claudio Raddatz, “The Composition of Growth Matters for Poverty Alleviation,” World Bank Policy Research Working Paper No.”
Ending Extreme Poverty and Sharing Prosperity: Progress and Policies (2015, background): “Poverty is less responsive to growth in such economies because the availability of jobs— the main channel through which growth uplifts the poor—is limited (Inchauste and SaavedraChanduvi 2014; Inchauste and others 2014; Loayza and Raddatz 2010; World Bank 1990; IMF 2014b).”