Why has Africa Failed to Reduce Significantly Poverty over the MDG period?


January 2016

 

*The views expressed in this Working Paper are those of the authors and do not necessarily represent those of UNDP or UNDP policy.

El Hadji Fall, Economics Advisor, UNDP Benin, el.hadji.fall@undp.org; corresponding author

JanvierAlofa, National Economist, UNDP Benin, janvier.alofa@undp.org

§Marc Akplogan, Economist at the Ministry of Economics and Finances in Benin, akpmd1@yahoo.fr

1

Abstract

This paper examines factors that explain for Africa’s mixed results in poverty reduction despite good economic performance during the span of Millenium Development Goals (MDGs). To vet this issue, we start by analyzing elasticities of growth to poverty in Africa over the recent period (1995-2015). We also evaluate economic growth rates needed for African countries to reach the Sustainable Development Goal (SDG) of halving poverty by 2030. Lastly, the roles of economic structures, trade liberalization, human development and governance on the magnitude of the elasticity of growth to poverty are also taken into consideration, given that natural resource endowments among African countries largely vary.

Results indicate that high growth rates in Africa over the past twenty years have had a positive effect on poverty reduction, in spite of regional discrepancies. The initial level of income inequality and its evolution over time have had partial adverse effect on the magnitude of poverty reduction. Against this backdrop, the income per capita growth rate required to halve poverty by 2030 varies by country and region, sometimes reaching 2-digit figures. While trade liberalization initiated by African countries did not have much bearing on reducing poverty, poor economic governance and unfavorable initial conditions for trade openness are among key factors that still hinder poverty reduction in Africa. For trade liberalization or ‘trade openings’ to be pro-poor, African countries must empirically strive for a 56% school rate enrollment in secondary education. Finally, the structure of the economies has contributed differently to reduce poverty according to natural resource endowments of the country.

JEL Classification numbers: F19, F43, I32, I29, O55

Key words – Poverty, Growth, Inequality


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