Pro growth, pro poor: Is there a trade off? (Draft)

This paper enters the poverty debate by assessing the impact that a series of pro growth policies have on inequality and headcount poverty. The author finds that regardless of their impact on inequality, all the pro growth policies considered lead to lower poverty levels in the long-run. However, evidence also indicates that some pro-growth policies may lead to higher inequality and, under plausible assumptions for the distribution of income, to higher poverty levels in the short-run. The possibility of policy interventions that increase poverty in the short-run but reduce it in the long-run appears when income levels and income distribution are allowed to have different speeds of adjustment to policy changes.

In conclusion, the author states that these findings would justify the adoption of:

• a pro growth policy package at the center of any poverty reduction strategy, and
• pro poor measures that complement such a package and avoid potential short run increases in poverty.