| Abstract: |
The United Nations has set as a goal for the world community the halving of
the rate of poverty between 1990 and 2015. Previous literature and empirical
work provides a strong consensus that growth reduces poverty, and several
recent studies have also found that the higher is income inequality within a
country the more limited is the impact of growth on reducing poverty. But in
dynamic economies most economic growth comes from productivity growth, and few
studies have tested the relationships between productivity growth, poverty and
inequality. The present study uses several sources of international data on
labour productivity, poverty and income inequality, and finds that across the
developing countries for which data are available productivity growth plays a
substantial role in reducing poverty. This effect is also found to be stronger
in countries with relatively low income inequality. Furthermore, productivity
growth is found to account for changes in poverty better than the more
commonly used economic growth. This conclusion suggests that developing
countries, in attempting to reach their poverty reduction objectives, should
pursue policies that foster productivity growth. However, a strong social
safety net is also required to ensure that the adjustment costs that come with
productivity increases do not fall disproportionately on the poor and that all
members of society realize the gains from growth. |
| Keywords: |
Productivity, Poverty, Inequality, Productivity Growth, Social Security System, Social Policy, Reform, Economic Reform, Urban, Rural, Developing Countries, Development, Growth, Millenium Development Goals |