Expected Poverty Changes with Economic Growth and Redistribution

Abstract

This paper focusses on the theoretical and computational framework in order to estimate the impact of economic growth or that of the change in inequality on poverty. During the last few years, there was a growing interest to perform such estimations and to anticipate the implication of some strategic policies, that can be adopted to meet the Millennium Development Goal (MDG, henceforth), that is to cut poverty by half. As is illustrated in this paper, estimated poverty changes may be less precise or even wrong. Precisely, this bad estimation occurs when the distributive changes are non-marginal, whereas the used approach is based on the assumption of marginal changes. In an other case, and where the estimation is implicitly based on a parameterized model of the income distribution, results may be less precise when the predicted distribution cannot reproduce perfectly that derived with the sample. In this study, by using some popular methods, we have used some household surveys of the African countries, as well as, fictive data to show the error size that can occur. Further, we propose a new numerical method to allow to estimate accurately the impact of distributive changes on poverty.