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Revisiting Growth‐Poverty Relationship: A Medium‐Term Causality Approach
Author(s) -
PérezMoreno Salvador
Publication year - 2016
Publication title -
south african journal of economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.502
H-Index - 31
eISSN - 1813-6982
pISSN - 0038-2280
DOI - 10.1111/saje.12120
Subject(s) - economics , poverty , gross domestic product , per capita , causality (physics) , panel data , poverty reduction , per capita income , developing country , demographic economics , econometrics , development economics , economic inequality , real gross domestic product , sample (material) , inequality , macroeconomics , economic growth , demography , mathematics , mathematical analysis , population , chemistry , physics , chromatography , quantum mechanics , sociology
Abstract This article examines the potential medium‐term causal relationship between changes in Gross Domestic Product (GDP) per capita and poverty in developing countries during the 1970s–1990s. For this purpose, we use panel data model evaluation techniques to test the out‐of‐sample forecasting performance of competing models. We conclude that the evidence supports the hypothesis that increases in GDP per capita cause unidirectional poverty reduction, measured by the $1/day poverty rate, in the period 1970s–1980s. The results are similar when analysing low‐ and middle‐income countries and mid‐high‐ and very high‐inequality countries separately. However, in the period 1980s–1990s, it is only statistically significant for low‐income countries.