Growth vs. distribution: does the pattern of growth matter?

Despite the fashion for pro-poor growth the term remains undefined. This paper proposes three possible definitions, based on comparing the poor's share in incremental income with their existing share, their population share and an international norm, and examines the pattern of growth over time and in different regions.

The growth of the poor's income can be decomposed into a growth effect and a distribution effect. Using data from 143 growth episodes it is found that the growth effect dominates, but that distribution is important in a significant minority of cases. In over a quarter of cases distribution played a stronger role than growth in increasing the income for the poor.

Moreover, if there is no systematic relationship between growth and distribution, then it is clearly better to have growth that is pro-poor rather than not in order to achieve international poverty reduction targets. Econometric analysis of growth regressions for each quintile support the idea that openness benefits the whole population. However, it is not associated with progressive changes in distribution.

Moreover, modelling the determinants of the poor's share in incremental income finds a robust perverse relationship with governance - less liberty leads to a more pro-poor pattern of growth.

There is also evidence of a trade-off between growth and distribution suggesting that attention to distribution will be better for the poor than going for growth.

The sectoral pattern of growth also matters. [author]

This paper was prepared as background for the DFID white paper on "Eliminating World Poverty: Making Globalisation Work for the Poor"