Analysis of Growth, Poverty and Inequality in Sub Saharan Africa.
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Date
2008-07
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A.A.U
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, ethno linguistic 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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Analysis of Growth, Sub Saharan Africa.