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Monitoring Surveys

Growth helps people move out of poverty Research that compares the experiences of a wide range of developing countries finds consistently strong evidence that rapid and sustained growth is the single most important way to reduce poverty. A typical estimate from these cross-country studies is that a 10 per cent increase in a country’s average income will reduce the poverty rate by between 20 and 30 per cent.1 The central role of growth in driving the speed at which poverty declines is confirmed by research on individual countries and groups of countries. For example, a flagship study of 14 countries in the 1990s found that over the course of the decade, poverty fell in the 11 countries that experienced significant growth and rose in the three countries with low or stagnant growth. On average, a one per cent increase in per capita income reduced poverty by 1.7 per cent (see Figure 1).2 Among these 14 countries, the reduction in poverty was particularly spectacular in Vietnam, where poverty fell by 7.8 per cent a year between 1993 and 2002, halving the poverty rate from 58 per cent to 29 per cent. Other countries with impressive reductions over this period include El Salvador, Ghana, India, Tunisia and Uganda, each with declines in the poverty rate of between three and six per cent a year. Driving these overall reductions in poverty was the rebound in growth that began for most of the countries in the mid-1990s. The median GDP growth rate for the 14 countries was 2.4 per cent a year between 1996 and 2003. Numerous other country studies show the power of growth in reducing poverty: