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Inclusive Growth Framework

Inclusive Growth Framework

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Inclusive Growth Framework

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  1. Inclusive Growth Framework Applied Inclusive Growth Analytics Course June 29, 2009 Susanna Lundstrom, PRMED

  2. Outline • Rationale for Inclusive Growth • The IG framework • The three main steps • The overall dynamics • The profile of the economic actors • Going through the tree

  3. Why Inclusive? • Rapid pace of growth is unquestionably necessary for substantial poverty reduction • Kraay (2004): Explains 70% in the short run and 97% in the long run • Lopez and Serven (2004): The poorer country the more important • But for sustainable growth in the long run it is typically: • broad-based across sectors,and • inclusive of the large part of the country’s labor force. • Growth Commission: IG and sustainable growth • Important for efficient use of resources, political stability and to avoid conflicts • Part of the social welfare function – people care about inclusion

  4. Characteristics of IG analytics • Growth is fundamental and the core of the analysis • Improved incomes through productive employment rather than direct redistribution (“the poor as economic actors”) • Equality of opportunities and level playing field • Absolute pro-poor growth • Focus on ex-ante analysis of sources and constraints to IG growth

  5. How much focus on general growth or inclusiveness? • General growth is fundamental, but the constraints can also be analyzed from the perspective of different economic actors • Focus is on productive employment – self or wage employed • The weights depend on the country context. • Zambia: Highly concentrated growth – equality of opportunities important • Mongolia (and Zambia): Resources rich, Dutch disease effected countries – broad-based growth fundamental • Tajikistan: Migration – need for domestic productive employment • Benin: Very poor, low growth country - general growth

  6. Income increases through productive employment Poverty Reduction/ Inclusion Economic Growth Self-employed Wage-employed Business Environment Analysis Employability Analysis EA: Constraints for individuals viewed from the perspective of different economic actors BEA: Constraints for firms viewed from the perspective of different economic actors

  7. Growth Diagnostics vs. IG Analytics • Growth Diagnostics emphasize: • The firm as starting point • Constraints from the perspective of a representative firm • Short Time-Horizon • Business Environment Analysis • Human Capital from the perspective of a firm • Inclusive Growth Analytics emphasize: • The individual/economic actor as starting point – worker or firm owner • Disaggregated analysis – constraints depending on self/wage employed, size of firm, sector, formal/informal,… • Long Time Horizon: More emphasise on time-lags from reform to impact, structural changes central • Sector Dynamics Analysis, Employability Analysis and Business Environment Analysis • Human Capital central in many dimensions

  8. Three Main Parts • The overall dynamics • Drivers of past growth: sustainable or dividends? • Past dynamics and the potential in different sectors: Growth-Poverty Pattern, Sector Dynamics, Labor migration and Demographics, Productivity Dynamics, Diversification, etc • The profile of the economic actors • Identifying the income-generating activities and resources (health, education/skills) of the different economic actors, especially the non-included group • Going through the tree • Given the characteristics and future opportunities of different economic actors identified in step one and two: • Look at the constraints from the perspective of different economic actors (when that differs: country-specific)

  9. Human Capital in IG Analysis • Study of demographic trends • To analyze dynamics of the population and labor force • To ascertain expected changes in participation rates • Dynamics of Output, Poverty and Employment • Growth decomposition in employment and productivity changes • Poverty – Growth links • Profile of the Economic Actors • Analysis of selected labor groups: • Employed vs unemployed (and underemployed); Agricultural, Informal, Self employed vs Modern Employees; Rural vs Urban + Poor vs non poor (i.e. Poor Rural vs Poor Urban); Selected Economic Activities • Human Capital Constraints from the Perspective of the Individuals • Employability Analysis • Human Capital Constraints from the Perspective of the Firms • Returns to Education • Estimating labor demand, probability of participation and probability of getting “good” jobs • Labor market regulations

  10. Human Capital in the IG Tree