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Sustained growth with equity is needed to halve poverty in Africa

Written by: id 21

Article Overview: Researchers predict that many African countries will not reach the Millennium Development Goal (MDG) target of halving extreme poverty by 2015. Will accelerated economic growth or better income distribution be most helpful in getting African countries get back on track to achieve the MDG poverty target?

Sustained growth with equity is needed to halve poverty in Africa

Researchers predict that many African countries will not reach the Millennium Development Goal (MDG) target of halving extreme poverty by 2015. Will accelerated economic growth or better income distribution be most helpful in getting African countries get back on track to achieve the MDG poverty target?

Research from Göteborg University, Sweden, looks at the challenge of halving poverty in Africa by 2015. More specifically, it examines the relationship between growth, inequality and poverty in the region. The researchers use data on poverty and income distribution for 31 African countries during the period 1981-2001.

The first MDG target is to reduce the proportion of people living in extreme poverty (daily income of less than US$1) by 2015 to half what it was in 1990. While other developing regions have been moving in the right direction, in Africa the share of people living in poverty increased from 44.6 to 46.4 percent between 1990 and 2001.

There is a widely accepted view that Africa will have to increase annual growth rates to at least seven percent if the region is to attain the MDG poverty target. But economic growth alone might not be the best way to halve poverty by 2015. Income distribution will also be critical.

The way income is distributed among the population determines how a country converts economic growth into poverty reduction. In some countries, even modest improvements in equity could result in substantial reductions in poverty.

Key findings of the research include:

Most African countries would only need a modest (sustained) rate of annual per capita income growth to the reach the MDG poverty target if income inequality is maintained at the current level.
Nearly half the African countries studied could accommodate some increase in inequality and still reach the MDG poverty target if current growth rates are maintained.
Initial levels of poverty and inequality determine the particular combination of growth and redistribution that each country will need to reach the poverty target.
Richer countries with high inequality can reduce poverty significantly through small reductions in inequality.
Poorer countries with relatively low initial inequality will find it easier to reduce poverty by focusing on growth.
Since the data used in this research was collected, many countries in Africa have grown fairly strongly as a result of rising commodity prices. But the benefits from resource-based growth of this kind tend to be unequally distributed, rarely getting through to poor people. And African countries have a poor record of sustaining economic growth.

The implications of the research include:

Growth remains critical for attaining the MDG poverty target.
Policies will be needed to improve the way benefits from resource-based growth are distributed.
African countries will need to focus on sustaining growth over the longer-term.
Maintaining stability and finding ways to protect households against shocks will be important.
More research is needed to understand how changes to the structure of the economy and the composition of household income impact on growth and inequality.
Source(s):
‘Can Africa Reduce Poverty by Half by 2015?’ Development Policy Review, 25.2, pages 147-166, by Arne Bigsten and Abebe Shimeles, 2007


Funded by: African Economic Research Consortium

id21 Research Highlight: 2 October 2007

Further Information:
Arne Bigsten
Department of Economics
Göteborg University
PO Box 640
SE 405 30 Göteborg, Sweden

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Article Tags: african countries, economic growth, extreme poverty, improvements, income distribution, income inequality, initial levels, mdg, millennium development, moving in the right direction, per capita income, population, poverty and inequality, poverty in africa, poverty reduction, proportion, redistribution, relationship, substantial reductions, target research



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