Poverty in Africa

Here’s an interesting paper by Sala-i-Martin and Pinkovskiy on the evolution of poverty in Africa, and it contains exciting news: African poverty is falling and is falling rapidly since 1995 (this contradicts some older research). Moreover, this evolution is remarkably general across African countries, and not just explained by good news in a few large countries. Poverty is falling even in countries which are believed to burdened by geography, bad agricultural prospects, a history of slave trade, war, or lack of natural resources. And, to make the good news complete: income inequality has also decreased, and the Millennium Development Goal of halving the proportion of people earning less than $1 a day will be achieved on time.

You can see the reduction of the poverty rate in Africa in the graph below. From a “high point” of almost 45% of the population surviving on less than $1 dollar day in the late 1980s, that rate has fallen to 32% in 2006. How come? As you can also see in the graph, at the time poverty began to decline around 1995, GDP began to grow (after three decades of zero or negative growth). The graph shows a striking correlation between poverty reduction and economic growth, something I have written about before in another context, see here and here).

(source)

Of course, poverty reduction isn’t the automatic result of GDP growth only. Other factors are at work as well, but the paper is silent about those.

What’s interesting is that this African growth spurt since 1995 (probably briefly interrupted by the current recession) isn’t just caused by growing oil prices. If that had been the case, we would have seen increasing income inequality, since revenues from the oil industry are typically appropriated by elites. But that’s not the case. Poverty reduction has gone hand in hand with a reduction in income inequality. You can see the extent of this reduction in the following two graphs from the paper:

(source)

This means that growth has benefited the poor. However, although the reduction in poverty is impressive, it’s not quite as impressive as poverty reduction in China.

More on poverty measurement. More poverty statistics. More on Africa.

[Via http://filipspagnoli.wordpress.com]