New Economics Papers
on Central and South America
Issue of 2005‒01‒16
two papers chosen by

  1. Productivity Growth and Poverty Reduction in Developing Countries By Centre for the Study of Living Standards
  2. The Relative Richness of the Poor? Natural Resources, Human Capital, and Economic Growth By Claudio Bravo-Ortega; Jose de Gregorio

  1. By: Centre for the Study of Living Standards
    Abstract: The United Nations has set as a goal for the world community the halving of the rate of poverty between 1990 and 2015. Previous literature and empirical work provides a strong consensus that growth reduces poverty, and several recent studies have also found that the higher is income inequality within a country the more limited is the impact of growth on reducing poverty. But in dynamic economies most economic growth comes from productivity growth, and few studies have tested the relationships between productivity growth, poverty and inequality. The present study uses several sources of international data on labour productivity, poverty and income inequality, and finds that across the developing countries for which data are available productivity growth plays a substantial role in reducing poverty. This effect is also found to be stronger in countries with relatively low income inequality. Furthermore, productivity growth is found to account for changes in poverty better than the more commonly used economic growth. This conclusion suggests that developing countries, in attempting to reach their poverty reduction objectives, should pursue policies that foster productivity growth. However, a strong social safety net is also required to ensure that the adjustment costs that come with productivity increases do not fall disproportionately on the poor and that all members of society realize the gains from growth.
    Keywords: Productivity, Poverty, Inequality, Productivity Growth, Social Security System, Social Policy, Reform, Economic Reform, Urban, Rural, Developing Countries, Development, Growth, Millenium Development Goals
    JEL: O47 O10 P17 I32 D31
    Date: 2003–09
  2. By: Claudio Bravo-Ortega; Jose de Gregorio
    Abstract: Are natural resources a blessing or a curse? Bravo-Ortega and De Gregorio present a model in which natural resources have a positive effect on the level of income and a negative effect on its growth rate. The positive and permanent effect on income implies a welfare gain. There is a growth effect stemming from a composition effect. However, the authors show that this effect can be offset by having a large level of human capital. They test their model using panel data for the period 1970–90. They extend the usual specifications for economic growth regressions by incorporating an interaction term between human capital and natural resources, showing that high levels of human capital may outweigh the negative effects of the natural resource abundance on growth. The authors also review the historical experience of Scandinavian countries, which in contrast to Latin America, another region well-endowed with natural resources, shows how it is possible to grow fast based on natural resources. This paper is a product of the Office of the Chief Economist, Latin America and the Caribbean Region.
    Keywords: Education; Macroecon & Growth
    Date: 2005–01–10

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