A New Growth Approach to Poverty Alleviation
نویسنده
چکیده
Growth theory has often been perceived by development economists as being orthogonal to their main concern, namely, that of understanding the sources of persistent poverty and stagnation in households and villages, and of designing policies aimed at overcoming them. Growth theory, they would argue, is a subdiscipline of macroeconomics: it features economies with representative producers and consumers; and it focuses on aggregate savings and the role of physical or human capital accumulation in long-run growth and convergence. In particular, growth theory is not so concerned with poverty and inequality between rich and poor individuals within a country. Empirical growth studies have been equally perceived as being too aggregate: most often carried out at a cross-country level, they involve aggregate variables such as average per capita gross domestic product (GDP), average total factor productivity (TFP), average savings rate, average measures of nancial development, or average education indicators. In contrast, by focusing directly on households and local institutions and infrastructure, and by using highly targeted control experiments to evaluate the e¤ectiveness of such institutions in a particular community or village, development economists feel entitled to believe that they have found the right approach to deal with the issue of poverty alleviation, and of how to close the gap between rich and poor. This paper is an attempt to break the divide between growth and development economics. Using the example of India over the past decades, we argue that innovation and/or productivity growth have been main engines of poverty reduction in that country. We also argue that new growth theories can shed light on this process. Moreover, these can also explain why growth and poverty reduction has not occurred in Latin America. The reminder of this essay is organized as follows. In Section 2 we summarize what is currently known about the recent evolution of growth and poverty indicators in India over the past four decades. In Section 3, we provide a very brief presentation of new growth theory and of some of its main predictions. In Section 4 we use our description of new growth theory to analyze the reform process in India. In Section 5, we show
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