Analysis of Growth, Poverty and Inequality in Sub-Saharan Africa
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2008-07
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Abstract
Unlike the standard cross-country growth regressions that focus on the long run average growth and hence mask episodes of high and low growth that most of these countries experience, this paper follows the recent literature and examine growth episodes in SSA countries. This new approach applied enable us identify years of growth accelerations and episodes which were sustained over the medium and long-term. More specifically, utilizing the Penn World Data Tables (version 6.2), the study follows the diagnostic or two-pronged strategy of Rodrik (2005a and 2005b), which focuses on the particular constraints that prevent a given country from growing faster. In the latter part, we analyze the impact of growth on income poverty and inequality in selected countries drawing on available household survey data published by the World Bank in its Global Poverty Monitoring Database. To establish correlation between growth episodes(all accelerations and sustained ones) and policy variables, institutional variables and geographic factors, we estimate alternative limited dependant variable models. The results show that variables affect these two growth episodes differently. While US interest rate(proxy of international interest rate shock), petroleum price shock, democratization, regime change, resource richness and government expenditure are important predictors of growth accelerations, positive terms-of-trade shock, growth rate of GDP deflator, economic liberalization, financial liberalization, ethnolinguistic factorization, resource endowment, and age dependency ratio determine the probability of sustained growth. The reform variables are not crucial for igniting growth. Rather, these variables are highly correlated with the timing of sustained growth. On the other hand, by constructing a panel of income, poverty and inequality measures for selected countries, we were able to analyze the impact of growth on poverty and inequality; and of inequality on poverty. The result implies that inequality does not change significantly over time in the set of countries analyzed and that growth in these countries is generally pro-poor. It also depict that these countries should sustainably grow by about 7 percent per annum to achieve the MDG of poverty alleviation.
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Economic Policy Analysis, Economics