External publications

Does economic growth reduce multidimensional poverty? Evidence from low and middle-income countries

Balasubramanian, Pooja / Francesco Burchi / Daniele Malerba
External Publications (2021)

in: Courant Discussion Papers, Georg-August-Universität Göttingen (288)

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The long-standing tradition of empirical studies investigating the nexus between economic growth and poverty has concentrated on monetary poverty. This paper engages in the little-explored debate on the relationship between growth and multidimensional poverty, by employing two novel, individual-based multidimensional poverty indices: the G-CSPI and G-M0. It relies on an unbalanced panel dataset of 95 low- and middle-income countries between 1990 and 2018: this is thus far the largest sample and time-span used for this purpose. Using a first-difference econometric strategy, the empirical analysis indicates that a 10% increase in GDP decreases multidimensional poverty by approximately 4-5%. However, results differ depending on the subperiod considered: the elasticity is insignificant before 2000, while it is negative and largely significant afterwards. This is probably due to the changes that occurred in the international scenario at the beginning of the 21st century. Finally, a comparative analysis reveals that the elasticity of income-poverty to growth is between five to eight times higher than that of multidimensional poverty. Our results indicate that economic growth is an important instrument to alleviate multidimensional poverty, but its effect is substantially lower than that on monetary poverty.