Growth and Redistribution Components of Changes in Poverty Measures: Household Budget Survey Analysis 2000/01 and 2007
Abstract
This study estimates the impact of growth and income distribution on poverty in Tanzania using Household Budget Surveys ' data for 2000/01 and 2007. The analysis is done by decomposing the change in poverty into growth effect and redistribution effects using the Datt-Ravallion (growth and inequality decomposition). The decomposition of the changes in poverty has been done at the national level. Findings show that the changes in poverty observed in Tanzania are not reflected in the scenario that inequality remained constant over the period. The changes in poverty were expected to be much larger than what is presented in the official statistics. Using the FPL, the decrease is only 1.97%, while in actual fact it was supposed to have decreased by 16.3% during the 2007 growth period, and by 29.2% using the BNPL. If growth in mean consumption was constant as observed in 2001, using the BNPL the change in inequality would have increased poverty by 42.7% (27.03&) in 2001 (2007) growth period. Using the FPL, if growth in mean consumption was constant as observed in 2001, the change in inequality would have increased poverty by 40.9% (14.35) for the 2001(2007) growth period. The implication of the Datt-Ravallion decomposition is that though the growth effect is important in poverty reduction, redistribution would have a significantly positive impact on poverty alleviation. The growth in mean income amidst constant inequality would have had a substantial impact on poverty changes. In addition, policies that address issues of inequality €”i.e., redistributive policies €”could enhance the positive effects of growth on poverty alleviation more effectively.
JEL Classifications: Q54
Keywords: growth, income distribution, growth effect, redistribution effectsReferences
Aaron, H. & M. McGuire. 1970. Public Goods and Income Distribution. Econometrica, 38: 907 €“920.
Abbas, Q. & F. Peck James. 2007. Human Capital and Economic Growth: Pakistan, 1960 €“ 2003. Cardif University UK.
Agrawal, P. 2008. Economic Growth and Poverty Reduction: Evidence from Kazakhstan. Asian Development Review, 24(2): 90 €“115.
Ahluwalia, M. S. 1978. Rural Poverty and Agricultural Performance in India. Journal of Development Studies, 14: 3298 €“3323.
Araar, A. & J. Duclos. 2012. DASP: Distributive Analysis Stata Package. PEP, World Bank, UNDP and Université Laval.
Stephen L. Kirama
Atkinson, A.B. & M. A. Lugo. 2010. Growth, Poverty and Distribution in Tanzania. International Growth Centre, Working Paper 10/0831, Oxford University.
Banerjee, A. V. & E. Duflo. 2003. Inequality and Growth: What can the data say? Journal of Economic Growth, 5(1): 5 €“32.
Barro, R., Sala-I-Martin. 1992. Economic growth in a cross section of countries. Quarterly Journal of Economics, 106: 401 €“444.
Barro, R.J. 1991. Economic Growth in a Cross-Section of Countries. Quarterly Journal of Economics, 106(2): 407 €“444.
Baye, F. M. 2004. Growth and Redistribution Effects of Poverty Changes in Cameroon: A Shapley Decomposition Analysis. Forum Paper, African Development and Poverty Reduction: The Macro-Micro Linkage, 13 €“15 October, 2004.
Bernadette, D.K. 2008. Distribution Impact of Public spending in Cameroon: The Case of Health Care. AERC Research Paper 179, Nairobi Kenya.
Bhagwati, J. 2001. Growth, Poverty and Reforms. Economic and Political Weekly, 11.03 2001.
Bibi, S. & R. Chatti. 2005. Public Spending, Pro-Poor Growth and Poverty in Tunisia: A Multilevel Analysis. Working Paper, University of Tunis.
Bigsten, A., B. Kebede, Shimeles and M. Taddesse. 2003. Growth and Poverty Reduction in Ethiopia: Evidence from Household Panel Surveys. World Development, Vol.31 (1): 87 €“106.
also available on http: //www.handels.gu.se/epc/archive/00001686/01/ gunwpe0065.pdf.
Bourguignon, F. 2004. The Poverty-Growth-Inequality Triangle. Mimeo, Washington DC: The World Bank.
€”. 2003. The Growth Elasticity of poverty Reduction in T. Eicher, and S.Turnovsky (Eds), Inequality and Growth (pp 1-26), Cambridge MIT Press.
Chemingui, A. M. 2007. Public Spending and Poverty Reduction in an Oil-based Economy: The Case of Yemen. Development Strategy and Governance Division, International Food Policy Research Institute, Discussion Paper No. 00701.
Contreras, D.. 2001. Economic Growth and Poverty by Region: Chile 1990 €“1996. Development Policy Review, 19(3): 291 €“302.
Danielson, A. 2002. Growth Without Poverty Reduction? Examining Micro-Macro Links in Tanzania. Working Paper 2004: 22, Lund University, Department of Economics.
Datt, G. & M. Ravallion. 1992. Growth and Redistribution Components of Changes in Poverty Measures: A Decomposition with Applications to Brazil and India in the 1980s. Journal of Development Studies, 38: 275 €“295.
Dhongde, S.. 2004. Measuring the Impact of Growth and Income Distribution on Poverty in India. University of California, JEL D30, 132, R11.
Dollar, D. & A. Kraal. 2002. Growth is Good for the Poor. Journal of Economic Growth, 7: 195 €“225.
Ekpo, A. 1994. Public Expenditure and Economic Growth in Nigeria 1960 €“ 1992. Research Report No.45, African Economic Research Consortium, Nairobi Kenya.
Fan, S., D. Nyange & N. Rao. 2005. Public Investment and Poverty Reduction in Tanzania: Evidence from Household Survey Data. Development Strategy and Governance Division, International Food Policy Research Institute, Discussion Paper No. 18
.
Foster, J., J. Greer & E. Thorbecke. 1984. A Class of Decomposable Poverty Measures. Econometrica, 52: 761 €“765.
Gallenson, W. 1997. Economic Growth, Income and Employment. New York: Yale University.
Gallup, J., S. Radelet & A. Warner. 1997. Economic Growth and the Income of the Poor. Mimeo, August.
Hoogeveen, J. & R. Ruhinduka. 2009. Poverty reduction in Tanzania since 2001: Good Intentions, Few Results. Paper prepared for the Research and Analysis Working Group.
Jain L., & S. Tendulkar. 1995. Economic Growth, Relative Inequality and Equity: The case of India. Asian Development Review 13(2): 138 €“368.
€”. 1990. Role of Growth and Distribution in the Observed Change in Headcount Ratio Measure of Poverty: A Decomposition Exercise for India. Indian Economic Review, XXV(2): 165 €“205.
Kakwani, N. 1997. On Measuring Growth and Inequality Components of Poverty with Application to Thailand. Discussion Paper, School of Economics, The University of New South Wales.
€”. 1993. Poverty and Economic Growth with Application to Cote d ' Ivoire. Review of Income and Wealth, 39(2).
Kweka, J. & O. Morrisey. 2000. Government Spending and Economic Growth. CREDIT and School of Economics, University of Nottingam.
Lugoe, N. T. 2003. Growth, Inequality and Poverty in Tanzania. M.A Thesis, University of Dar es Salaam.
Mankiw, N.G, D. Romer & D N. Weil. 1992. A Contribution to the Empirics of Economic Growth. Quarterly Journal of Economics, pp. 407 €“437.
McKay, A. 1997. Poverty Reduction through Economic Growth: Some Issues. Journal of International Development, 9(4): 665 €“673.
Mckay, A. 2005. Tools for Analysing Growth and Poverty: An Introduction. A document prepared by DFID ' s Pro-Poor Growth Team, Washington DC.
Mkenda, A. F., E. G. Luvanda & R. Ruhinduka. 2010. Growth and Distribution in Tanzania: Recent Experience and Lessons. Interim Report to REPOA.
Ravallion, M. & G. Datt. 2002. Why has Economic Growth Been More Pro-Poor in Some States in India than Others. Journal of Development Economics, 68(2): 381 €“400.
Ravallion, M. 1995. Growth and Poverty: Evidence from Developing Countries in the 1980s. Economics Letters 48(1995): 411 €“417.
Ravallion, M. & G. Datt. 2002. Why Has Economic Growth Been More Pro-Poor in Some States of India Than Others? Journal of Development Economics, 68: 381 €“400.
Rebelo, S. 1991. Long Run Policy Analysis and Long Run Growth. Journal of Political Economy, University of Chicago Press, 99(3): 500 €“521.
Stephen L. Kirama
Roemer, M. & M. Gugerty. 1997. Does Economics Growth Reduce Poverty? CAER, Discussion Paper No. 4, Cambridge Harvard Institute for International Development.
Romer, P. 1990. Human Capital and Growth: Theory and Evidence. Carnegie- Rochester Conference Series on Public Policy 32. (1990): 251 €“286.
Timmer, P., & M. Guerty. 1999. Growth, Inequality and Poverty Alleviation: Implications for Development Assistance. IR/PS Research Report No. 99, University of California.
Tsui, K. 1996. Growth-equity Decomposition of a Change in Poverty: An Axiomatic Approach. Economic Letters, 50: 417 €“423.
United Nations (UN). 2000. Millennium Development Goals in www.developmentgoals.org.
United Republic of Tanzania (URT). 2002), Household Budget Survey 2000/2001: Final Report, President Office €“ Planning and Privatization, Government Printers, Dar es Salaam.
White, H. & E. Anderson. 2000. Growth Versus Distribution: Does Pattern of Growth Matter? Mimeographed. Institute of Development Studies, Brighton.
Wilhelm, V. & I. Fiestas. 2005. Exploring the Link between Public Spending and Poverty Reduction: Lessons from the 90s. Working Paper, World Bank Institute.
