Working Paper 181 - Determining the Correlates of Poverty for Inclusive Growth in Africa

In spite of the high growth that Africa has experienced in recent years, poverty, inequality and unemployment remain high, indicating lack of inclusion in the development process and its outcomes. But poverty, for example, can be reduced at a faster rate when inclusive growth strategies are applied and when special income distribution policies are undertaken. This study is an attempt to contribute to the design of inclusive growth policies. It examines the correlates of poverty - headcount index of international poverty line at US$1.25 per day - with multivariate models using data on 43 African countries for the period, 1980 to 2011. Our empirical estimates suggest that higher levels of income inequality, primary education alone, mineral rents, inflation, and higher level of population tend to increase poverty in Africa and therefore bad for poverty reduction and inclusive growth in the continent. On the other hand, higher real per capita GDP, net ODA, and secondary education have significant negative effect on poverty in Africa and thus good for poverty reduction and inclusive growth in the continent. Trade openness has positive but insignificant effect on poverty in Africa in spite of the huge liberalization efforts of African countries. The inclusive growth measures of these results are discussed.