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This paper contributes to explain the cross-country heterogeneity of the poverty response to changes in economic growth. It does so by focusing on the structure of output growth. The paper presents a two-sector theoretical model that clarifies the mechanism through which the sectoral composition of growth and associated labor intensity can affect workers' wages and, thus, poverty alleviation. Then it presents cross-country empirical evidence that analyzes first, the differential poverty-reducing impact of sectoral growth at various levels of disaggregation, and the role of unskilled labor intensity in such differential impact. The paper finds evidence that not only the size of economic growth but also its composition matters for poverty alleviation, with the largest contributions from labor-intensive sectors (such as agriculture, construction, and manufacturing). The results are robust to the influence of outliers, alternative explanations, and various poverty measures.

Economic Growth --- Health, Nutrition and Population --- Household Income --- Household Survey --- Income --- Income Distribution --- Income Inequality --- Macroeconomics and Economic Growth --- Poor --- Poor Countries --- Poor Households --- Poor Individuals --- Population Policies --- Poverty --- Poverty Alleviation --- Poverty Data --- Poverty Index --- Poverty Line --- Poverty Measures --- Poverty Reducing --- Poverty Reduction --- Poverty Reduction Strategies --- Pro-Poor Growth --- Rural --- Rural Areas --- Rural Development --- Rural Poverty Reduction

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This paper analyzes how the employment/productivity profile of growth and its sectoral pattern are correlated with poverty reduction. The authors use a sample of 104 short-run growth spells in developing countries, between 1980 and 2001. They also identify some conditions of the labor market and the economic environment that are associated with employment-intensive growth or specific sectoral growth. The results show that, in the short run, although the aggregate employment-rate intensity of growth does not matter for poverty reduction any more than the aggregate productivity intensity of growth, the sectoral pattern of employment growth and productivity growth is important. Employment-intensive growth in the secondary sector is associated with decreases in poverty, while employment-intensive growth in agriculture is correlated with poverty increases. Similarly, productivity-intensive growth in agriculture is associated with decreases in poverty. Although the study does not address causality, coincidence of these phenomena in this large sample of heterogeneous countries and periods suggests that, in the short run, the sectoral productivity and employment pattern of growth may have important implications for poverty alleviation. Therefore, policies for reducing poverty should not overlook the sectoral productivity and employment implications of different growth policies.

Banks and Banking Reform --- Developing Countries --- Growth Pattern --- Growth Policies --- Labor Market --- Labor Markets --- Labor Policies --- Policy Research --- Poverty Increases --- Poverty Reducing --- Poverty Reduction --- Pro-Poor Growth --- Reducing Poverty --- Rural Development --- Rural Poverty Reduction --- Short-Run Growth --- Social Protections and Labor

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This paper contributes to explain the cross-country heterogeneity of the poverty response to changes in economic growth. It does so by focusing on the structure of output growth. The paper presents a two-sector theoretical model that clarifies the mechanism through which the sectoral composition of growth and associated labor intensity can affect workers' wages and, thus, poverty alleviation. Then it presents cross-country empirical evidence that analyzes first, the differential poverty-reducing impact of sectoral growth at various levels of disaggregation, and the role of unskilled labor intensity in such differential impact. The paper finds evidence that not only the size of economic growth but also its composition matters for poverty alleviation, with the largest contributions from labor-intensive sectors (such as agriculture, construction, and manufacturing). The results are robust to the influence of outliers, alternative explanations, and various poverty measures.

Economic Growth --- Health, Nutrition and Population --- Household Income --- Household Survey --- Income --- Income Distribution --- Income Inequality --- Macroeconomics and Economic Growth --- Poor --- Poor Countries --- Poor Households --- Poor Individuals --- Population Policies --- Poverty --- Poverty Alleviation --- Poverty Data --- Poverty Index --- Poverty Line --- Poverty Measures --- Poverty Reducing --- Poverty Reduction --- Poverty Reduction Strategies --- Pro-Poor Growth --- Rural --- Rural Areas --- Rural Development --- Rural Poverty Reduction

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The relative contribution of a sector to poverty reduction is shown to depend on its direct and indirect growth effects as well as its participation effect. The paper assesses how these effects compare between agriculture and non-agriculture by reviewing the literature and by analyzing cross-country national accounts and poverty data from household surveys. Special attention is given to Sub-Saharan Africa. While the direct growth effect of agriculture on poverty reduction is likely to be smaller than that of non-agriculture (though not because of inherently inferior productivity growth), the indirect growth effect of agriculture (through its linkages with nonagriculture) appears substantial and at least as large as the reverse feedback effect. The poor participate much more in growth in the agricultural sector, especially in low-income countries, resulting in much larger poverty reduction impact. Together, these findings support the overall premise that enhancing agricultural productivity is the critical entry-point in designing effective poverty reduction strategies, including in Sub-Saharan Africa. Yet, to maximize the poverty reducing effects, the right agricultural technology and investments must be pursued, underscoring the need for much more country specific analysis of the structure and institutional organization of the rural economy in designing poverty reduction strategies.

Agricultural Development --- Agricultural Growth --- Agricultural Productivity --- Agricultural Productivity Growth --- Agricultural Sector --- Agricultural Technology --- Economic Growth --- Economic Theory and Research --- Health, Nutrition and Population --- Household Surveys --- Income --- Macroeconomics and Economic Growth --- Poor --- Poor People --- Poor Smallholder --- Population Policies --- Poverty --- Poverty Data --- Poverty Reducing --- Poverty Reduction --- Poverty Reduction Impact --- Poverty Reduction Strategies --- Pro-Poor Growth --- Rural --- Rural Development --- Rural Development Knowledge and Information Systems --- Rural Economy --- Rural Poverty Reduction