Book Description

Many people still think first of economic growth in relation to poverty reduction. Indeed, their correlation is one of the mostdiscussed issues of combating poverty. The relationship is of great importance because if there is a clear causal dependency, reducing poverty could fundamentally be limited to measures to promote growth. However, if there was low growth or stagnation it would not be possible to reduce poverty decisively. In the opposite case, that of the phenomena having no causal relation, promising measures to reduce poverty could be taken up even without economic growth. Hardly anyone now explicitly expresses the view that economic development trickles down automatically to the poor. Practical experience has refuted this assumption dating from the early days of development policy in the 1960s. However, a number of studies show development of growth and a decline in poverty running parallel. On the other hand, there are also examples which show that despite high economic growth poverty is not reduced markedly. The common answer to the question this raises is thus: Yes, growth can reduce poverty, but only if additional measures oriented on the poor are taken up. This is often termed pro-poor-growth. But what that means in detail and whether economic growth as such plays a causal role at all, is not clarified. It is worth taking a look at the arguments on the basis of more recent empirical and theoretical knowledge. Among the many indicators of poverty, the income of the poor (income poverty) has the closest relationship to economic growth. An increase in gross domestic product and thus national income could, if other factors come into play be linked with an increase in the per capita income of the poor.