• Open Access

Poverty Reduction and Economic Structure: Comparative Path Analysis for Mozambique and Vietnam

Authors


  • 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.

Finn Tarp, United Nation University, World Institute for Development Economics Research, Katajanokanlaituri 6B, 00160 Helsinki (Finn@wider.unu.edu).

Abstract

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.

Ancillary