Disaggregated Impacts of Growth on Multidimensional Poverty: Does the Source of Growth Matter?

This paper presents comprehensive findings on the relationship between economic growth and poverty. Using a first-difference model applied to data from more than 80 countries spanning over 20 years, the paper investigates how changes in gross domestic product affect the Multidimensional Poverty Index and its subcomponents, considering variations in income level, region, and resource dependency. The analysis confirms that economic growth generally reduces the Multidimensional Poverty Index, although the magnitude of the effect varies significantly. It is less pronounced in low-income countries, Sub-Saharan Africa, Latin America and the Caribbean, and resource-dependent countries. The paper disaggregates gross domestic product growth by its dimensions, revealing that growth driven by total factor productivity, consumption, and sustainable growth significantly decreases the Multidimensional Poverty Index. In contrast, factors such as human capital development, capital deepening, investment, government spending, exports, and imports show ambiguous effects on the Multidimensional Poverty Index. These findings suggest that the effectiveness of these factors depends on country-level conditions. Given the clearer positive impact of total factor productivity, consumption, and sustainable growth on reducing multidimensional poverty, policy makers should prioritize strategies that promote these types of growth to fight poverty, especially in contexts where the effects of other growth contributors are uncertain or not well understood.