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Poverty Accounting. A fractional response approach to poverty decomposition

Working Paper 2016-413

Abstract

This paper proposes a new empirical framework for poverty accounting. Using a large collection of household surveys from 124 countries, we estimate income and inequality (semi-)elasticities of poverty for the $2 and $1.25 a day poverty lines as well as their contributions to poverty alleviation. We show that initial inequality is a strong moderator of the impact of growth and there has been a shift towards more pro-poor growth around the turn of the millennium. We project poverty rates until 2030 and show that an end of extreme poverty within a generation is unlikely.

Authors: Richard Bluhm, Denis de Crombrugghe, Adam Szirmai.

Keywords: poverty, inequality, income growth, fractional response models.
JEL: I32, C25, O10, O15.