Thursday, March 11, 2004


Recent empirical studies demonstrate that sustained and rapid economic growth has invariably been accompanied by reduction of poverty and, conversely, persistent growth failures have invariably been accompanied by persistent failure to reduce poverty. Raising the rate of growth is thus being increasingly recognised as necessary for poverty reduction.

The empirical evidence also points, however, to an important feature of the relationship between growth and poverty that is often neglected – namely, that there is no invariant relationship between the rate of growth and the rate of poverty reduction. Faster growth is not always accompanied by faster rate of poverty reduction, just as slower growth does not always entail slower rates of poverty reduction. Therefore, what matters for poverty reduction is not just the rate of growth but also what might be called the growth elasticity of poverty i.e. the rate of poverty reduction for any given rate of growth.

Policies for poverty reduction should therefore try to promote both faster rate of growth and a high growth elasticity of poverty. In the course of the recent explosion of growth literature, much has been written on what can be done to accelerate the rate of growth. But very little work has been done to understand what can be done to promote a high responsiveness of poverty to growth. An important objective of the present study is to advance such an understanding by examining the experience of growth and poverty in a number of Asian countries. It will do so by focusing on the idea that employment plays a crucial mediating role between growth and poverty.

The study is based on a synthesis of the findings from two sets of country studies that have recently been concluded – one by UNDP and the other jointly by ILO and SIDA. UNDP’s Asia-Pacific regional programme on the “Macroeconomics of Poverty Reduction” has examined for a number of Asian countries how macroeconomic policies can be rendered more pro-poor. Several of these studies have also examined the role of employment as a crucial mediating factor between growth and poverty. The ILO-SIDA studies have explicitly focussed on the role of employment in reducing poverty. The present synthesis will draw on the following studies – the UNDP studies on Armenia (UNDP 2003a), Bangladesh (Osmani et al. 2003), Indonesia (McKinley et al. 2003), Vietnam (Weeks et al. 2003) and Uzbekistan (UNDP 2003b) and the SIDA-ILO studies on Bangladesh (Rahman and Islam 2003) and Vietnam (Islam 2002).

The paper is structured as follows. Section II elaborates the analytical framework underpinning the study. This framework identifies three elements that determine the speed of poverty reduction – viz. the ‘growth factor’, the ‘elasticity factor’ and the ‘integrability factor’. Section III deals with the growth factor, demonstrating the importance of growth for poverty reduction. Section IV examines the elasticity factor, which is concerned with the responsiveness of poverty to growth. Section V looks into the ‘integrability factor’ i.e., the impediments that prevent the poor from gaining fully from the opportunities opened up by the growth process. Finally, section VI offers some concluding remarks.

Read full report