Economic growth as a poverty reduction strategy in the Southern African Development Community

M.Com. (Development Economics)Abstract: Economic growth has been at the core of poverty-reduction strategies in the Southern African Development Community (SADC) over the past years. To evaluate the impact of these strategies, the empirical analysis in this dissertation employs two-stage least squares estimation techniques to estimate the effect of economic growth and the distribution of income (proxied by the Gini coefficient) on the headcount index, the poverty gap and the squared poverty gap across 15 SADC countries over the period 1981 to 2013. The empirical results show that a one percentage point increase in mean income growth leads to a reduction in all three poverty measures: the headcount index falls by 1.1 percentage points, the poverty gap by 1.6 percentage points and the squared poverty gap by 1.9 percentage points. An important policy-related insight from these findings is that growth is not only effective in reducing the percentage of the population below the poverty line, as measured by the headcount index, but also the intensity and severity of poverty, as measured by the poverty gap indices. Moreover, income inequality is also found to be a significant determinant of poverty in the SADC. A one percentage point decrease in income inequality leads to a 1.5 percentage points decline in the poverty gap and a 2.5 percentage points decline in the squared poverty gap. These findings have important implications for poverty-reduction strategies in SADC countries. The main policy implication of the results is that SADC governments should, in addition to growth-promoting strategies, also implement specific measures to reduce the income gap between rich and poor people