Poverty-Reducing Growth Strategy in Poor Countries

Abstract

This paper synthesizes and develops research undertaken by participants in The North-South Institute project, "Macroeconomic policy choices for growth and poverty reduction" in low- income developing countries.¹ The project analysed the features of poverty and growth in seven poor countries of varying circumstances and proposed macroeconomic and growth policies for poverty reduction for them. The research was guided by the question: "How does poverty inform growth strategy?"

Our research provides evidence of the channels through which growth and distribution or poverty processes depend on each other and respond to policy together. We encapsulate the messages of these case studies in the following six propositions, discussed at length in the paper: i) macroeconomic stability reduces poverty; ii) land redistribution enhances growth; iii) income poverty traps constrain growth; iv) urban-rural growth disparities drive income inequality; v) regional poverty traps resist growth, and vi) ley growth policies can aggravate poverty gaps. 

The propositions suggest growth policies that may be either of two types in terms of impact on growth and distribution. They have the potential to enhance both growth and distribution (win-win) or to enhance growth while aggravating income gaps or vice versa (win-lose).