Unit 4 Macro: Growth Elasticity of Poverty | tutor2u Economics

Unit 4 Macro: Growth Elasticity of Poverty

Growth elasticity of poverty is a measure of elasticity (responsiveness) that calculates how much poverty falls for each percentage point in economic growth. According to a recent estimate from World Bank development economists Luc Christiaensen, Punam Chuhan-Pole and Aly Sanoh, that elasticity was about 2.0 in the developing world as a whole (excluding China) during the 2000s, but only 0.7 in Africa. In other words, the rapid growth achieved in many African countries over the last decade or more has not had as much impact on inequality as in other regions.

Inequality is relatively high in Africa: it has seven of the world’s 10 most unequal countries and inequality has widening in a number of countries. There are methodological issues and problems to be aware of - the data on income in unreliable and many published indicators on inequality in African countries focus on consumption rather than income.

Nonetheless the data renews the focus on measures and strategies that could be used to facilitate pro-poor growth in many African countries. Much of the GDP growth in the last decade has been focused in extracting natural resources - not necessarily in the places and sectors where extremely poor people live and work. In many African countries, manufacturing industries have seen persistently slow growth and new jb creation has not kept pace with rapid population growth. According to the World Economic Forum "The mismatch between high rates of economic growth and job creation in Africa is widening income inequalities and fueling social and political tensions."

While the extreme poor in SSA represented only 11 percent of the world’s total in 1981, they now account for more than a third of the world’s extreme poor. Growth in Africa has yet to translate into widespread poverty reduction - this is one of the key development challenges facing policy makers in the years ahead.

For further reading I recommend the 2013 edition of the Africa Competitiveness Report - available by clicking this link

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