Which is more important for Poverty Reduction- Growth or Employment? The case of a service based island

There is widespread conviction that for growth to be pro-poor it has to result in productive and decent employment, since it is the only sustainable way to reduce poverty. Yet though some analytical work has been done to critically examine the linkage of growth, employment and poverty reduction, empirically little has been done, more specifically in the context of servicebased developing economies. As such this paper aims at filling this gap by empirically examining the impact of employment and growth on poverty using a VAR framework in the context of Mauritius. The main results reveal that though both employment and growth contributes towards absolute poverty reduction, the former has a higher, longer lasting impact and even in the short run the same results prevail. Hence one way of increasing the responsiveness of poverty to real growth is to increase the employment intensity of growth. At the same time there is a need economy-wide expansion of income-earning opportunities as this will result in inclusive growth.