Redistribution and Growth for Poverty Reduction

In the late 1990s the bilateral and multilateral development agencies placed increasing emphasis on poverty reduction in developing countries. This emphasis led to the establishment by the United Nations of the so-called International Development Targets for poverty reduction. The achievement of a target requires policies, and policies are most effective within an overall, coherent strategy. A poverty target might be achieved through faster economic growth alone, redistribution, or a combination of the two. This paper presents an analytical framework to assess the effectiveness of growth and redistribution for poverty reduction. It concludes that redistribution, either of current income or the growth increment of income, is more effective in reducing poverty for a majority of countries than growth alone.