But was the faster pace of poverty reduction after simply a reflection of faster growth, or did poverty indeed become more responsive to growth? One measure of the pro-poorness of growth is the elasticity of poverty reduction to growth — in other words, by how much did poverty decline for every 1 percent increase in per capita income or consumption.
Thus, the question of whether poverty became more responsive to growth can be rephrased as whether the elasticity of poverty reduction to growth has increased or not. It turns out the answer depends to some extent on how growth is measured.
If by growth we mean changes in per capita consumption derived from household surveys, there is strong evidence that not only is the post period one of faster growth, it is also one of more pro-poor growth; the elasticity of the headcount index to growth increased from 1. On the other hand, if growth is measured by per capita income or consumption from the national accounts, the evidence still points to a higher elasticity for the headcount index post For poverty measures that take the depth or severity of poverty into account, the evidence is mixed: higher elasticity of poverty reduction post only holds if growth is measured using the surveys, but not if it uses national accounts.
Our research shows that during the past two decades the poor gained more from urban than from rural growth, altering the earlier relationship between the pattern of growth and poverty reduction.
Before , rural growth largely determined poverty reduction in the country as traditionally the vast majority of the poor lived in rural areas and depended on the rural economy for sustenance. While urban growth did indeed reduce urban poverty, it contributed little to national poverty reduction.
Since the early s, however, this pattern has undergone a striking change. Urban growth has now emerged as a major driver of national poverty reduction.
Since , urban growth was responsible for percent of the total fall in poverty Figure 3. This happened both directly, through urban growth having a larger impact on urban poverty, but even more importantly indirectly, through urban growth substantially impacting impact on rural poverty.
This indicates that the growth of cities, which have both bigger populations and higher productivity, has been good for poverty reduction as a whole in India. Before , rural growth, especially in the farm sector, mattered most for poverty reduction. Chaudhri, D.
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