Growth is necessary for poverty reduction. Growth is classically linked to poverty reduction through economic transformation – that is, people moving from less to more productive activities within sectors, and from less to more productive sectors. The scope for growth to reduce poverty will then depend on spill overs and indirect effects through demand for goods and services produced in other sectors, and through taxation and redistribution of income.
This briefing note summarises the findings of the forthcoming Chronic Poverty Report on Growth (Shepherd et al., 2019) and introduces the concept of Growth from Below (GfB).
‘Growth from below’ (GfB) is how most people escape and sustain escapes from poverty. This growth stems from small investments by households in micro-enterprises, smallholder agriculture, the rural non-farm economy, the urban informal sector, housing, human capital and through migration and remittances.
Most people escape extreme poverty through ‘growth from below’ (GfB) – that is, through small investments by households in micro-enterprises, smallholder agriculture, the rural non-farm economy, and through the urban informal sector.
Fewer people escape through ‘growth from above’ (GfA) – which results from larger, more formal investments, for example in labour-intensive manufacturing. Those who do accomplish this through GfA work mainly in industries such as garment manufacturing, where employment is accessible to poor, often migrant women and men.
Governments and their development partners largely support GfA, though there are some governments and donors that do much better in supporting GfB.
Social and economic policy measures to tighten labour markets assist both GfA and GfB to reduce poverty, but more strategic efforts and attention are needed to balance GfA and GfB to facilitate sustained escapes from poverty
Authors: Andrew Shepherd and Vidya Diwakar