Statistics on Poverty and Economic Growth

Economic growth (annual growth in GDP per capita) and poverty reduction go hand in hand.

(source)

economic growth reduces poverty

(source)

Here’s the example of Africa, where growth and poverty are almost absolute mirror images:

one dollar a day poverty and gdp growth in subsaharan african

(source)

However, this pattern doesn’t show up in all countries. Compare Sweden and the US, for instance. The following graph  shows, for the years between the late 1970s and the mid 2000s, on the vertical axes the income of households at the tenth percentile of the distribution — near, though not quite at, the bottom — and on the horizontal axes GDP per capita:

gdp and poverty

(source)

Both countries enjoyed significant economic growth. But in the U.S. the incomes of low-end households didn’t improve much, apart from a brief period in the late 1990s. In Sweden growth was much more helpful to the poor.

In Austria, Belgium, Denmark, Finland, France, Ireland, the Netherlands, Norway, Spain, and the United Kingdom, the pattern during these years resembles Sweden’s. In Australia, Canada, Germany, Italy, and Switzerland it looks more like the American one. (source)

What is the reason for this difference? Why does economic growth benefit the poor in some countries but not so much in other countries? In countries where economic growth benefits the poor, it’s not only because growth leads to higher incomes but because it allows governments to transfer more to the poor (more transfers, not in share of GDP, but more because there is more GDP):

gdp and poverty

(source)

If economic growth is to help the poor, one has to have a government willing to pass on the benefits of growth to the poor. For information, here are the numbers on government social welfare expenditure as a percentage of GDP, for OECD countries:

government social welfare expenditure as a percentage of GDP, for OECD countries

(source)

1 Comment

  1. Pingback: The Causes of Human Rights Violations (44): Corruption | P.a.p.-Blog, Human Rights Etc.

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