The recognition that inequality affects the impact of growth on poverty reduction has led to a broadening consensus among policymakers that looking beyond a ‘growth-first’ agenda will be necessary to deliver inclusive growth in developing countries. The Asian Development Bank’s Strategy 2020 (Zhuang, 2010) is indicative of this approach, and defines three policy pillars of an inclusive growth strategy:
- High, efficient, and sustained growth to create productive jobs and economic opportunity: As a means of creating opportunities for productive employment and generating revenues for governments to invest in their citizens, high and sustained growth is a necessary – but not sufficient – condition for inclusive growth.
- Social inclusion to ensure equal access to economic opportunity: This will require enhancing the human capacities of marginalised and disadvantaged sections of society – including women and young people – by providing access to education, health facilities, and infrastructure.
- Social safety nets: These are important to protect the chronically poor or those who cannot participate in the employment opportunities created by growth due to shocks outside of their control.
The focus on inclusiveness through equality of opportunity and social protection as well as economic growth is a clear departure from the ‘trickle-down development’ approach, and is backed up by evidence from developing Asia. Balakrishnan et al.’s 2013 study has shown that increased fiscal spending on health, education and social safety nets while implementing measures to improve financial inclusiveness has helped make growth more inclusive.
Further, the literature on what causes economic growth is both extensive and controversial. Duflo (2011) argues that balancing growth with equity (a key challenge for practitioners aiming to foster inclusive growth) will be achieved not by trying to affect the sources of growth, which is extremely difficult to do, but by implementing policies that enable poor people to access the opportunities created by growth whenever it happens.
Several studies have found that poorly designed policies to tackle inequality can result in further distortions in an economy that hinder growth and potentially increase poverty levels. Despite this, there is scope for ‘win-win’ policies such as better targeted subsidies and active labour market policies to promote employment, which address the fact that some of the constraints to growth also hamper the participation of the poor in the opportunities created by growth (Adedji, Du and Opoku-Afari, 2013). Other successful ‘win-win’ policies that can increase growth and opportunities for the poor simultaneously include those that address underlying market failures or asset inequalities (Ravallion, 2005).
In line with this broad approach, this chapter will examine a range of ‘ingredients’ that can contribute to inclusive growth. The further sources listed below will also be useful for practitioners aiming to gain a more general understanding of policies that can foster inclusive growth.
Additional resources
Commission on Growth and Development. (2008). The Growth Report: Strategies for Sustained Growth and Inclusive Development. Washington DC: Commission on Growth and Development
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Zhuang, J. (ed.) (2010). Poverty, Inequality and Inclusive Growth in Asia: Measurement, Policy Issues, and Country Studies. Manila: Asian Development Bank.
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Duflo, E. (2011). Balancing growth with equity: the view from Development. Paper presented at the Jackson Hole Symposium, Federal Reserve Bank of Kansas City, August 1.
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Stuart, E. (2011). Making Growth Inclusive: Some lessons from countries and the literature. Oxford: Oxfam International.
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Anand, R., Mishra, S. and Peiris, S. (2013). Inclusive Growth: Measures and Determinants. Washington DC: IMF
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CAFOD. (2014). What is “inclusive growth”? London: CAFOD
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- Balakrishnan, R. Steinberg, C. and Syed, M. (2013). The Elusive Quest for Inclusive Growth: Growth, Poverty, and Inequality in Asia? Washington DC: IMF
See full text - Ravallion, M. (2005). Inequality is Bad for the Poor. Washington DC: World Bank
See full text - Adedji, O., Du, H. and Opoku-Afari, M. (2013). Inclusive Growth: An Application of the Social Opportunity Function to Selected African Countries. Washington DC: IMF
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