Xavier Sala-i-Martin and Maxim Pinkovskiy (2010). NBER Working Paper No. 15775, February.

This paper impressively documents trends in poverty and inequality in Africa, where outcomes are more positive than many scholars and organizations claim.

Many international development organizations have been pessimistic about African poverty reduction in recent years.  The UNDP and World Bank have stated that progress towards meeting the MDGs has been mainly driven by Asia.  In 2009, the UN Millenium Campaign Deputy Director for Africa stated that “Poverty continues to intensify due to the exclusion of groups of people on the basis of class, caste, gender, disability, age, race, religion and other status” (2).  Others have argued that what growth there is is attributable to rising oil and natural resource prices, which have little impact upon poverty reduction.

In this paper, Sala-i-Martin and Pinkovskiy argue that “The conventional wisdom that Africa is not reducing poverty is wrong” (1). They use standard purchasing power parity GDP data from the Penn World Tables and inequality data from the United Nations University WIDER-DS dataset. Methodologically, they estimate African income distributions, poverty rates, and inequality and welfare indices from 1970 to 2006 and report four interesting findings surrounding Africa’s “growth spurt” beginning around 1995.  First, African poverty has been “falling and falling rapidly” since 1995 (1).  Second, if present trends continue, excluding Congo-Zaire, the MDG goal of halving the fraction of people living on less than one dollar a day will be met two to three years ahead of time in 2012 or 2013.  Third, the accelerated growth beginning in 1995 decreased rather than increased inequality.  And finally, African poverty reduction is widespread and is not being driven by any subset of countries.  They comment that “poverty fell for both landlocked as well as coastal countries; for mineral-rich as well as mineral-poor countries; for countries with favorable or with unfavorable agriculture; for countries regardless of colonial origin; and for countries with below- or above-median slave exports per capita during the African slave trade” (1).

These trends can be powerfully captured graphically.  The following figure shows African income distributions in 1970, 1990, 2000, and 2006.  African incomes decreased between 1970 and 1990, but between 1990 and 2006 steadily rose (moved to the right).

Changes in income drove changes in poverty over the 1970-2006 period.  39.8% of individuals were poor in 1970.  This rate rose to 42.0% in 1985 where it hovered for a decade.  In 1995, the poverty rate began to dramatically fall, dropping by ten percentage points by 2006.  The following figure shows how the poverty rate was almost an exact mirror image of GDP per capita growth over this period.  The authors report that “These results contradict the 2008 Millenium Development Goals Report (UN, 2008), which asserts that ‘little progress was made in reducing extreme poverty in sub-Saharan Africa.’  Our estimates disagree: the African poverty rate in 2006 was 0.318, 30% lower than in 1995 (0.428) and 28% lower than in 1990 (0.421).  That is, while progress in Africa has by no means been as extraordinary as that of East Asia, there has been a significant reduction in poverty and a substantial movement towards achieving the MDGs” (13).

Additional analyses shown below confirmed that poverty is falling in landlocked as well as coastal countries, mineral rich as well as mineral poor countries, and agriculturally favourable and unfavourable countries.  Conflictual countries and those with a history of large amounts of slavery present a more complicated scenario, but one that exhibits the same pattern since the early 2000s.  The relationship between poverty and various colonial histories is also shown.  These relationships were statistically robust to various datasets and assumptions.