When it comes to poverty reduction, less may be more

It is a widely accepted belief that people should be better off as the economy expands: The greater the growth, the greater the likelihood that poverty numbers will decline. While there are many good and valid reasons to hold this to be true, exceptions exist, where the lives of the poor have improved rapidly despite slow growth, or where poverty actually increases along with strong economic growth.

Such exceptions have not been studied extensively, perhaps due to an unwillingness to challenge the dominant liberal economic thinking. World Bank researchers David Dollar and Aart Kraay have argued, for instance, that economic growth alone is sufficient for the alleviation of poverty and that growth is correspondingly best fostered through free market mechanisms. This idea is further supported by empirical data that that suggests a decline in absolute poverty rates around the world during times of economic boom.

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