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The Relationship Between Growth, Poverty and Income

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The Relationship Between Growth, Poverty and Income THE RELATIONSHIP BETWEEN GROWTH, POVERTY AND INCOME INEQUALITY: AN ASSESSMENT OF THE PRO-POOR GROWTH OF SOFALA PROVINCE DURING THE PERIOD OF 1996-97 AND 2002-2003 BY IBRAIMO HASSANE MUSSAGY THESIS SUBMITTED IN FULFILLMENT OF THE REQUIREMENTS FOR DOCTOR OF PHILOSOPHY IN DEVELOPMENT ECONOMICS TO ZIMBABWE OPEN UNIVERSITY SUPERVISOR: DR. IGNATIUS ISAAC DAMBUDZO JUNE 2014 ABSTRACT Mozambique like many other developing countries has faced lack of information and sometimes there is no detailed information about the poverty and inequality at district levels. This research investigates the quality of growth in Sofala province, a province which is located in the central region of Mozambique. Since the quality of growth comes from the analysis of poverty and inequality indicators, the research specifically investigates the relationship between growth, poverty and inequality thorough an assessment of the pro-poor growth of Sofala province during the period of 1996 to 1997 and 2002 to 2003. The methodology used to analyze the pro-poor growth in Sofala province combines both, qualitative and quantitative data. A recent technique of Poverty Mapping that user Small Area Estimation which consists of combining two data sources: Census and Household Survey was used to estimate poverty and inequality class of measures at disaggregated geographical units such as districts. Applying the technique of Poverty Mapping, a Census of 1997 and IAF 1996 to 1997 and IAF of 2002 to 2003 data sources were combined to update poverty and inequality indicators of Sofala’s 13 districts. The welfare measures of interest, poverty and inequality class of measures were updated applying consumption model using the household expenditure of 8,604.391 Meticais a day. Once the estimates were computed, maps creation using the GIS information was straightforward. A number of maps concerning poverty, inequality and the assessment of these indicators during the period 1996 to 1997 and 2002 to 2003 were presented. In general, the conclusion of this study shows that 59% of the districts have presented a pro- poor growth of 33% which presented an anti pro-poor growth, and 8% which present an inconclusive growth. In order to reduce poverty in Sofala province in general there is a need to design policies of poverty reduction. Some of the following points have to be taken into account: agricultural performance, the number of existing schools, hospitals and food security. These are the variables that appear to explain poverty and inequality in the province of Sofala. i ACKNOWLEDGMENTS This research has benefited a lot from the caring guidance of my supervisor, Dr. Ignatius Isaac Dambudzo and Dr. A.S. Chikasha. I thank the ZOU team for the opportunities to present seminars, where useful comments have been given to improve the research and to carry out a confident field work. The support from Luis Quepe, my colleague, is highly appreciated. A special recognition goes to the Rector Father Alberto Ferreira, to make possible this partnership with ZOU and the Doctoral program in Mozambique and my Director Alfandega Manjoro, for the support during this research study Last but not least, I would like to express my sincere and deepest gratitude to my family; friends and all the people that directly and indirectly helped me to successfully conclude the course and this research. I thank everyone for their remarkable generosity. ii DEDICATIONS To my Father, Hassane Mussagy and Mother, Culsumo Issufo To my Dear and Beloved Wife, Cátia Vanessa Mussagy To my Beautiful daughters, Humayra Ayana Mussagy and Rayssa Chanila Mussagy iii TABLE OF CONTENTS ABSTRACT .......................................................................................................................... I ACKNOWLEDGMENTS ..................................................................................................... II DEDICATIONS .................................................................................................................. III ACRONYMS ....................................................................................................................VIII LIST OF TABLES .............................................................................................................. XI LIST OF FIGURES ..........................................................................................................XIII LIST OF MAPS ............................................................................................................... XIV CHAPTER 1: ........................................................................................................................ 1 INTRODUCTION ................................................................................................................ 1 1.1. Background to the Study............................................................................................. 1 1.2. Study Area ................................................................................................................. 3 1.3. Statement of the Problem .......................................................................................... 24 1.4. Aim and Objectives .................................................................................................. 26 1.5. Hypotheses ............................................................................................................... 26 1.6. Significance of the Study .......................................................................................... 26 1.7. Delimitation of the Study .......................................................................................... 28 1.8. Organization of the Study ......................................................................................... 30 1.9. Definition of Special Terms and Expressions ............................................................ 32 1.9.1. Definition of Poverty ......................................................................................... 32 1.9.2. Annual Growth Rate of GDP ............................................................................. 33 1.9.3. Inequality in Terms of Income ........................................................................... 33 1.9.4. Pro-poor Growth ................................................................................................ 35 1.10. Chapter Summary ................................................................................................... 36 iv CHAPTER 2: ...................................................................................................................... 37 REVIEW OF RELATED LITERATURE ........................................................................... 37 2.1. Introduction .............................................................................................................. 37 2.2. Definitions and Measures of Poverty, Income inequality and Growth ....................... 37 2.2.1. Poverty .............................................................................................................. 37 2.2.2. Income Inequality .............................................................................................. 42 2.3. Channels of Economic Growth that lead to Poverty Reduction ................................. 46 2.4. Pro-Poor Growth ...................................................................................................... 53 2.4.1. Theoretical Discussion of the term Pro-Poor ...................................................... 53 2.4.2. Analytical Discussion of the term Pro-Poor ........................................................ 56 2.4.3. The Factors that Make Growth more Pro-poor ................................................... 62 2.5. The Triangle Poverty, Inequality and Growth ........................................................... 66 2.5.1. The Relationship Between Inequality and Growth .............................................. 66 2.5.2. Relationship Between Poverty, Inequality and Growth ....................................... 69 2.5.3. Economic Growth and Reduction of Inequality on Poverty: Latin America ........ 74 2.5.4. The Effect of Inequality on the Poor .................................................................. 79 2.5.5. Inequality, Poverty and Growth in Santa Catarina and Mato Grosso ................. 81 2.6. Poverty Mapping Technique ..................................................................................... 83 2.6.1. Small Area Estimation ....................................................................................... 84 2.6.2. Household Unit Level Method ........................................................................... 84 2.6.3. Community Level Data Method ......................................................................... 87 2.6.4. Importance of Poverty Mapping ......................................................................... 88 2.7. Application of Poverty Mapping across Countries .................................................... 91 2.7.1. Poverty Mapping and its Application in Developing Countries .......................... 91 2.7.2. Poverty Mapping and its Application in Mozambique ...................................... 104 v 2.8. Pro-Poor Growth across Countries .......................................................................... 107 2.8.1. Pro-poor Growth: Brasil................................................................................... 107 2.8.2. Pro-poor Growth: Burkina Faso ......................................................................
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