Note: We are grateful for highly insightful and helpful comments by Erik Thorbecke, Jeff Round, and two anonymous reviewers. The usual caveats apply. Financial support for this research through the Danish Consultative Research Committee for Development Research (FFU) is acknowledged.
Poverty Reduction and Economic Structure: Comparative Path Analysis for Mozambique and Vietnam
Article first published online: 4 OCT 2011
© 2011 The Authors. Review of Income and Wealth © International Association for Research in Income and Wealth 2011
Review of Income and Wealth
Volume 58, Issue 4, pages 742–763, December 2012
How to Cite
Arndt, C., Garcia, A., Tarp, F. and Thurlow, J. (2012), Poverty Reduction and Economic Structure: Comparative Path Analysis for Mozambique and Vietnam. Review of Income and Wealth, 58: 742–763. doi: 10.1111/j.1475-4991.2011.00474.x
- Issue published online: 4 NOV 2012
- Article first published online: 4 OCT 2011
- structural path analysis;
While economic growth generally reduces income poverty, there are pronounced differences in the strength of this relationship across countries. Typical explanations for this variation include measurement errors in growth–poverty accounting and different compositions of economic growth. We explore the additional influence of economic structure in determining a country's growth–poverty relationship and performance. Using structural path analysis, we compare the experiences of Mozambique and Vietnam—two countries with similar levels and compositions of economic growth but divergent poverty outcomes. We find that the structure of the Vietnamese economy more naturally lends itself to generating broad-based growth. A given agricultural demand expansion in Mozambique will, ceteris paribus, achieve much less rural income growth than in Vietnam. Inadequate education, trade and transport systems are found to be more severe structural constraints to poverty reduction in Mozambique than in Vietnam. Investing in these areas can significantly enhance the effectiveness of Mozambican growth to reduce poverty.