African poverty is falling

by on March 1, 2010 at 2:35 pm in Current Affairs, Data Source, Economics | Permalink

Xavier Sala-i-Martin and Maxim Pinkovskiy report:

The conventional wisdom that Africa is not reducing poverty is wrong. Using the methodology of Pinkovskiy and Sala-i-Martin (2009), we estimate income distributions, poverty rates, and inequality and welfare indices for African countries for the period 1970-2006. We show that: (1) African poverty is falling and is falling rapidly; (2) if present trends continue, the poverty Millennium Development Goal of halving the proportion of people with incomes less than one dollar a day will be achieved on time; (3) the growth spurt that began in 1995 decreased African income inequality instead of increasing it; (4) African poverty reduction is remarkably general: it cannot be explained by a large country, or even by a single set of countries possessing some beneficial geographical or historical characteristic. All classes of countries, including those with disadvantageous geography and history, experience reductions in poverty. In particular, poverty fell for both landlocked as well as coastal countries; for mineral-rich as well as mineral-poor countries; for countries with favorable or with unfavorable agriculture; for countries regardless of colonial origin; and for countries with below- or above-median slave exports per capita during the African slave trade.
Here is an ungated version.  This part is especially interesting:
Not only has poverty fallen in Africa as a whole, but this decline has been remarkably general across types of countries that the literature suggests should have different growth performances. In particular, poverty fell for both landlocked as well as coastal countries; for mineral rich as well as mineral poor countries; for countries with favorable or with unfavorable agriculture; for countries regardless of colonial origin; and for countries with below or above median slave exports per capita during the African slave trade. Hence, the substantial decline in poverty is not driven by any particular country or set of countries.

1 a student March 1, 2010 at 4:01 pm

After a quick look, it appears this is another paper of Sala-i-Martin’s that does not include any measure of uncertainty of findings (“standard error” was not found in a search).

There was an article in the Journal of Economic Literature a few years ago that raised a number of questions about the techniques he used in his QJE paper.

Interesting stuff, but a grain or two of salt is involved.

2 dbc March 1, 2010 at 6:31 pm

I have to concur about taking this with a grain of salt given the techniques used to identify poverty shares. In particular, an important part of his identification strategy relies on distributional assumptions which, while maybe not too far-fetched, are hard to verify given the paucity of data. Although he performs robustness checks with multiple distributions, he assumes the same functional form in all countries, which seems to me likely to lead to systematic misstatement if the deviations from the given form are correlated with characteristics upon which he’s regressing (say, if commodity-exporting countries have different income gradients among the relatively wealthy than other countries.

As such, while the finding of falling poverty rates overall seems fairly robust to these sorts of assumptions, as the quantile data he uses should show this directly, finer comparisons between countries likely to be a bit less likely to be totally robust. The other factor that makes the poverty results more convincing is that a number of approaches to measuring economic activity in Africa recently have also found more robust growth than suggested by conventional estimates. An interesting recent attempt by Alwyn Young to measure income via consumption surveys (which included some of its own questionable functional form assumptions, but completely different ones) also found significantly higher than traditionally reported growth. An ungated version is at http://www.econ.yale.edu/seminars/develop/tdw09/young-090924.pdf

As to why poverty reduction may be understated in the standard international statistics, Young provided some suggestions. In particular, I recall him stating that, when he talked to the officials at the UN responsible for coming up with the official annual national income statistics in order to inquire more deeply about the methodology, the response he received was that “It’s our job to come up with numbers every year, and so we come up with numbers every year.” (They went on to admit that some numbers were “imputed” using data from trends and “similar” countries, so at the very least it’s quite plausible that measurement error has been substantial.) Since the data issues are so thorny, and because multiple approaches seem to agree, I’m inclined to think that this sort of exercise is informative and worthwhile as a partial substitute for the expensive data-gathering apparatus that would be necessary to avoid the kind of parametric assumptions used in this research.

3 Michael March 1, 2010 at 8:07 pm

Oops, my name is Michael G. Heller and my book about development policy sequences is Capitalism, Institutions, and Economic Development

4 Nathan Smith March 2, 2010 at 9:23 am

I’m not sure exactly how to give Bush credit for this, but the US president has so much influence on so many things in the world that it seems like there must be some connection between the Bush administration and the boom in developing countries that occurred from 2004-2007. It would be nice to figure out what it is so we could do it again. Of course, there might also be a connection between Bush and the financial crisis which cut the 2004-2007 boom short, but (a) even the 2008 catastrophe doesn’t seem to have erased all the developing world’s gains, and (b) it just might be possible to reproduce the conditions for the global boom while avoiding the crash that followed.

5 King Kong March 2, 2010 at 12:39 pm

We need to drop the fixation on the US/IMF/UN’s impact on Africa. I’ve been traveling to and doing business in Western/Sub Saharan Africa (Ghana, Burkina Faso, Mali, Nigeria, etc) for a number of years and things are changing – dramatically – but it has little to do with us. It’s the Chinese. They’re everywhere. They’re coming for mineral extraction rights. In exchange for natural resources they build roads, hospitals, and broadband/telecom infrastructure. Instead of pushing a ridiculous moral/governance agenda and turning government officials in these countries into lecherous and corrupt beggars, they make a true “fair trade” – give us your resources and we’ll build you something that you can use. They often bring in their own labor to get the job done. While western aid often gets caught up in a bureaucratic labyrinth, or spends an eternity looking for a local contracting partner that’s ultimately ill equipped to build the needed infrastructure, the Chinese just do it. The problem in Africa isn’t that the people there are lazy, stupid, innately corrupt – etc. The problem is that they aren’t connected to the rest of the world and each other. But the western aid and “development” industry, an economy unto itself, assumes that there are bigger problems afoot and that those need to be fixed before folks there can succeed. Bullshit. The West has been dumping money attached to moralizing into the region for 30 years now, and with what result? Welfare doesn’t work – look at American inner cities, where the aid dynamic has created a similar outcome.
I love my country, and the West, but thank God for the Chinese. I think they’re going to wind up doing more for Africa through shear self interest than a generation’s worth of misguided good intentions from the West. The proliferation of Chinese restaurants in cities like Accra and Lagos is also nice – I’ve never liked many of the local food options – it’s nice to have a familiar alternative.
Anyway, let the DC and World Bank based policy wonks wank away with their proscriptions for a better Africa. The money they send will continue to wind up with corrupt pols. Meanwhile the Chinese will continue to build away, and African business owners and business people will continue to benefit. Seriously, go to Nigeria and Ghana – if you’re well travelled I doubt you’ll find a place that has a more industrious, creative, and entrepreneurial population. Maybe when the West drops the pity – like the Chinese have – they’ll be able to get over themselves and offer business partnerships and a fair exchange of resources instead of counterproductive handouts.

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In 1977 New York City had an electric blackout. It was the occasion of extensive looting and rioting. 26 years later there was another major blackout in NYC. That time there were no major incidents of civil disorder. What does that history tell us about society? What had changed in NYC over that time period? And what does it tell us about Chile?

7 doctorpat March 4, 2010 at 12:31 am

I agree with subrot0 that China’s ignoring of stupid aid theory has a enormous benefit in pulling people out of poverty.

I can’t see any reason at all that this will lead to a new cold war. If anything, a more international China will draw them into having more common interests with the rest of the world.

8 adjustable beds April 19, 2010 at 11:16 pm

It’s nice to hear that African poverty is falling. Good news! It means that our society has a great development.

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10 CandyJou August 16, 2010 at 1:23 am

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14 Hydraulic Jack September 27, 2010 at 1:35 am

I don’t think myself, that he was talking about being hungry because of lack of food, or being thirsty because of lack of drink. I believe that he was stating, that if you live by what he was teaching, you will never go “hungry or thirsty” for love, peace and everything else he was teaching.
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15 Wii Console October 6, 2010 at 1:23 am

I think that the conditions in Africa have Improved but only marginally. With so much natural resources, I just hope that fellow Africans can actually get them selves out of poverty. Wii Controller

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21 FM Transmitter December 21, 2010 at 7:59 am

If the poverty as a whole has fallen, individuals will get rich also is it not ?

22 Tina from cheap flowers and flower shop January 5, 2011 at 7:02 am

It is good to know that africa is getting out of poverty slowly..but still..

But it would be naive to think that we´re not suppoused to help those people in need..

Tina

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26 Kathy January 31, 2011 at 1:05 pm

The African countries benefit from the “catch-up effect”. Already developed countries must invest huge amount of capital to reap only marginal improvements in productivity and output (law of diminishing returns). Poor countries on the other hand tend to see significant improvements in GDP and quality of life from relatively minor increases in capital.

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34 แทงบอลออนไลน์ March 5, 2011 at 3:15 pm

Likewise.
You can only have poor.
if you have rich and vice versa.
However if everyone is rich it just means everyone has a lot of wealth to spend.
So it also depends on the pricing of goods.

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