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Growth Elasticity of Poverty: Alternative Estimates and a Note of Caution
Author(s) -
Ram Rati
Publication year - 2006
Publication title -
kyklos
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.766
H-Index - 58
eISSN - 1467-6435
pISSN - 0023-5962
DOI - 10.1111/j.1467-6435.2006.00351.x
Subject(s) - economics , poverty , per capita , income elasticity of demand , context (archaeology) , econometrics , per capita income , poverty reduction , elasticity (physics) , poverty rate , demographic economics , geography , economic growth , demography , population , materials science , archaeology , sociology , composite material
SUMMARY Estimates of the elasticity of headcount poverty with respect to income suggested in many influential studies appear too high and imply a more important role for income‐growth in poverty‐reduction than is appropriate. Direct estimates based on aggregate data for several different periods are much smaller at about −1, which (in absolute terms) is no larger than one‐half of those suggested in the literature. Researchers and policymakers are urged to use the lower estimate for any real‐world application in a global or cross‐country context. In such contexts, when per capita income increases by X percent during any period, decline in headcount poverty during the period should be expected to be of the order of X percent, and not, as most influential studies suggest, 2X percent.