What’s behind pro‑poor growth? An investigation of its drivers and dynamics

Abstract

Standard growth incidence curves describe how growth episodes impact on the overall income distribution. However, measuring the pro-poorness of the growth process is complex due to measurement errors, and to the effect of shocks that may hit the percentiles of the income distribution in different ways. Therefore, standard growth incidence curves may misrepresent the true growth process and its distributive impact. Relying on a non-anonymous approach, we compare actual growth episodes at each percentile of the initial personalized distribution with counterfactual mobility profiles which rule out the presence of shocks. We consider Indonesia in 2000–2007 and 2007–2014, two growth spells in which there was substantial, significant upward mobility among the initially poorer, a sizeable part of which cannot be explained by unobserved individual endowments or standard socio-economic attributes. The difference between actual and expected growth is related, in the early 2000s, to the economy-wide transformations, which characterized the early years of the post-Suharto era. However, in the more recent years, it can be largely attributed to individual recovery from previous negative losses and high vulnerability and reactivity to shocks for the poor.