Tools for analysing growth and poverty: An introduction

How to make pro-poor growth a reality? This report is part of a larger programme that aims to provide better advice to governments on policies that facilitate the participation of poor people in the growth process. Specifically, it seeks to give an intuitive explanation for non-specialists as to why pro-poor growth analysis tools can be useful in practice. The three sets of tools are provided.

A first set builds a disaggregated picture of growth, these include:

• macro and micro concepts of growth - to emphasise the distinction between overall economic growth and income growth experienced by individuals and households
  
• sectoral analysis of growth- to identify variations in growth rates across different productive sectors
• growth accounting analysis -to see to what extent growth is due to increased factor inputs (labour, physical capital etc.) or due to increased overall productivity
• spatial and other subnational disaggregation of growth - to identify variations in growth across different groups of the population using micro level data
  

A second set examines the distributional and poverty impact of growth, they include:

• profiling changes in poverty and inequality - to understand the pattern of changes in poverty and inequality disaggregated across different categories of individuals and households
• Ravallion-Huppi decomposition - to assess the importance of poverty reductions within different groups, and migration between groups in accounting for poverty change
• Datt-Ravallion Decomposition - to determine the extent to which a change in poverty is accounted for by growth in average income and by a change in the its distribution
• growth and inequality elasticities of poverty –a summary measure of the extent to which growth or a change in inequality reduces poverty
• growth incidence curves for income – a graphical tool for looking at the distributional pattern of growth
• rate of pro-poor growth – a summary measure of growth experienced by the poor
• non-income growth incidence curves - the extension of growth incidence curves to look at the distributional pattern of change of non-monetary indicators
  

A third set of tools explains the links between growth, inequality and poverty reduction, and include:

• intra-country regression analysis - identifying key factors that are important for growth and poverty reduction drawing on sub national variations
• labour market analysis - selected methods for looking at the role of labour markets in linking growth and poverty reduction
• CGE modelling and related techniques - a modelling technique to simulate distributional and other impacts of policy change