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Rati Ram

Mentor Department



Measuring the magnitude of the effect of economic growth on poverty rate is relevant both for academic and policy purposes. This paper estimates the income elasticity of poverty in six South Asian countries – where world’s majority of the poor people live – for the most recent period since 2005 to 2015. Based on the findings, five notable points can be identified. First, there has been substantial improvement in poverty situation during the period reflected by high rates of decline in $1.90 poverty rate. Second, compared to 1990-2005 period, observed effect of growth on poverty reduction during the last decade has increased across all the countries under the study by a factor of three and higher. Third, income elasticity of poverty declines substantially as the cut-off point of poverty measure is increased from $1.90 to $3.20 and $5.50 poverty line. Fourth, huge variability is observed in elasticity estimates for this small group of countries and the pattern of variation is almost similar to what is reported by Ram (2015). Finally, this implies that cross-country factors other than income might explain a larger part of the reduction o poverty for the South Asian countries.

Income Elasticity of Poverty: Recent Estimates for South Asian Countries

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