Economic growth and poverty alleviation: A reconsideration of Dollar and Kraay

Dollar and Kraay's paper 'Growth is Good for the Poor' has proved to be remarkably influential, with many of its conclusions widely quoted, particularly in support of the open-market policies of the 'Washington consensus'. In this paper, the Dollar and Kraay results are critically assessed from a number of different perspectives. It is found that the central result of a strong correlation between average per capita income and the income of the lowest quintile is extremely robust. However, the significance and often the signs of the other regressors change under different samples and specifications. In addition, all of the specifications are dominated by the influence of regional dummies. The implications are that in general the policy prescriptions associated with the Dollar and Kraay regressions cannot be sustained. In addition, the weakness of the variable chosen to measure poverty and the differing support provided in different specifications for the other regressors fully justifies the initial scepticism and invites further research in this area.