Growth is Good for the Poor? Not Necessarily

In mainstream economic thinking, it is common to find a simplistic relationship between economic growth and poverty reduction. Two decades ago, a paper titled “Growth is Good for the Poor” purported to have established a strict one-to-one relationship between economic growth at the national level and growth of income among the poor. In this note we explain the methodological, modelling, and analytical shortcomings of the exercise. Using simulations based on random numbers we show that the data did not support the arguments and that, consequently, the policy conclusions were not warranted by the analysis. The lessons are important in the current context when addressing growing poverty in the wake of the COVID-19 pandemic.