Why Don't We See Poverty Convergence?

Abstract

Average living standards are converging among developing countries and faster growing economies see more progress against poverty. Yet we do not find poverty convergence; countries starting with higher poverty rates do not see higher proportionate rates of poverty reduction. The paper tries to explain why. Analysis of a new dataset suggests that, at given mean consumption, high initial poverty has an adverse effect on consumption growth and also makes growth less poverty-reducing. Thus, for many poor countries, the growth advantage of starting out with a low mean is lost due to a high incidence of poverty. JEL: D63, I31, I32, O15

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