IS GROWTH BENEFITS TO THE POOR IN CAMEROON?

By

Eric Lambert DJIALEU

e-mail: djialeu_lambert@yahoo.fr
National Institute of Statistic, Cameroon

1 Introduction
Since the Millenium Development Goals (MDG) Declaration, poverty alleviation became a main
objective in Cameroon by reducing on a half the poverty head count measure in 2015. But this
goal will not be achieve. Is it because of the worseness of policy conducted in this country? Since
recently, authors believe that a pro-poor growth is able to reduce poverty. According to Ravallion
(2004), a pro-poor growth is an increase in the Gross Domestic Product followed by reduction of
poverty. Kakwani deepens the definition of Ravallion. For him, growth is pro-poor if in addition
to poverty reduction, economic growth simultaneously decreases inequality. Hence, it follows
that economic growth is a prerequisite for poverty alleviation. But to avoid inequality coming
from him, economic growth have to well be redistributed.

In the Strategic Document for Growth and Employment (ECSD), the Cameroonian government
opts for sustained economic growth and employment creation that will enable it to gradually
reduce poverty. Therefore, it would be relevant to study the link between growth and poverty,
thus establish the transmission speed of benefits of growth to the poorest layers while detecting
the inequalities that may occur during the growth of the distribution process. To implement
policies of poverty reduction, several channels agree on the need to go through growth.
However, this growth can have pervasive effects if accompanied by strong inequalities. Before
any policy of poverty reduction through growth, it is therefore necessary to analyze the
relationship between growth, inequality and poverty. This study therefore working to provide an
answer to the following question: What is the impact of economic growth on poverty and income
inequality?

It is useful recognized that growth is an engine of poverty reduction. But in sub-Saharan Africa
including Cameroon, this growth is not only low (below 6%), but the links between it and the
poverty are not clearly defined. Thus, the main objective of this study is to establish the links
between poverty, growth and inequality in Cameroon. Specifically this will involve:

 Break down the effect poverty indices of growth and inequality;

 Simulate the evolution of poverty as a result of changes in the indices income level or
inequality.few time

2 Theoretical framework
With the economic crisis emerged in the late 1980s, African States in partnership with
international organizations have set foot economic programs (SAP) to restart growth. However
in some countries, growth of GDP have often been accompanied by an increase in inequality
and poverty sometimes see. Yet for Kuznets (1955), growth had a virtuous effect on inequality
and poverty. The author, based on the experience of developed countries during the Industrial
Revolution, indicated that the relationship between per capita income and inequality was reversed
U curve type. In other words, in the beginnings of economic growth, profits concentrated in the
hands of the wealthiest and are holders of this inequality. And revenues generated eventually
should benefit the whole population.

However, Deninger and Squire (1996) showed that growth has too little effect on the level of
social inequality. Regarding the impact of growth on poverty, some studies find that growth is
supporting the poor. For authors such as Sala-i-Martin (2005) growth alone is enough to reduce
poverty. According to this author, poverty has fallen sharply around the world for decades
without the need for targeted policies. In this, the growth is historically poor. In addition, a study
of 80 countries and over 40 years by Dollar and Kraay (2002) shows that on average, the lowest
of the five income segments of the population increases parallel to the overall growth of the
economy, defined by GDP per capita. Similarly, the Bigstein et al study (2002) and Boccanfuso et
al (2003) in Senegal lead to the virtuous effect of growth on poverty.

Nevertheless, other authors (Bourguignon, 2003; Pernia, 2002) believe that growth is not enough
to reduce poverty which does not alter the distribution of income (Goudie and Ladd, 1999)
systematically. The results from the work of these authors suggest that inequalities are an
important dimension of the problem that can not be neglected in the fight against poverty.
Therefore, the growth promotion policies must be followed redistribution of measures to reduce
depressive effects inequality (Kabore, 2005).

Subsequently, inequality- growth- poverty is a triangle (Bourguignon, 2005) respectively

highlighting the positive impact of growth on poverty reduction; reducing inequalities in reducing
poverty all things being equal; but still an ambiguous relationship of growth and inequality.

3 Methodology and data

3.1 Methodology

To perceive the effects of growth and inequality on the variation of poverty, we refer in this
section initially three most commonly used methods of decomposition in the literature. They are:
static decomposition of Kakwani (1993); Dynamic decomposition of Datt and Ravallion (1993)
and the axiomatic decomposition Kakwani (1997). Static decomposition of Kakwani measures
independently the impact of variation of income and inequality on poverty, while the dynamic
decomposition breaks up the variation of poverty into component of growth and redistribution.
Then we simulate changes in poverty indices due to changes in the growth rate of the average
household consumption and the change in the Gini index. This simulation method considered in
this paper is based on that proposed by Datt and Walker (2002). Per adult equivalent
consumption expenditure is used as welfare indicator to calculate the various poverty indexes.
The first assumption made is that household consumption expenditure is growing at the same
rate as the rate real growth of the head of household business sector. This assumption was later
relaxed by incorporating: the mobility of the population in the different sectors, the change in
inequality within a sector, the change in the consumer price index, adjustments between the
consumption growth rates and national accounts data.
3.2 Data sources

We apply the methodology described in the paragraphs above in Cameroon survey data from
households carried out respectively into 2001 and 2007. These surveys covered all ten regions in
the country and affected both urban and rural areas. The number of households visited in 2001
and 2007 was respectively 10 992 and 11 534.

4. Growth, Inequality and Poverty in Cameroon between 2001 and 2007

The static decay present elasticities measures with respect to all the negative growth. This means
that globally the growth component has a favorable effect on the reduction of poverty in
Cameroon. Specifically, a 1% increase in the growth rate in 2001 will lead to a decline in poverty
incidence, depth and severity of poverty 1.478 respectively; 2.142 and 2.605 assuming that
inequality remained unchanged. Similarly, the 1% increase in the growth rate will lead to a
reduction in poverty measures presented in the order above 1.452 respectively; 2.239 and 2.9 still
under assumption that inequality does not vary over the period. The side of the inequality
component elasticities measures against poverty is all positive in 2001 and 2007. This induces a
negative effect on poverty reduction. This negative effect is more pronounced if the severity of
poverty is used to measure income poverty. Indeed, the 1% increase in the Gini index would
result in an increase in inequality within poor 4.776 in 2001 and 4.973 in 2007 if the average
income remained unchanged. Moreover, except for the incidence of poverty, inequality effect
tends to dominate the growth effect in terms of the depth and severity of poverty. Thus, an
increase in inequality would be likely to rapidly increase poverty in these two dimensions that the
reduction provided by a increased growth in the same proportions.

Analysis of the results of Datt and Ravallion decomposition shows that at the national level.
Growth and redistribution of income had a positive impact on reducing poverty indices (P0, P1,
P2). Indeed, growth and redistribution have contributed to the reduction of 0.11% and 0.16% in
the incidence of poverty over the 2001-2007 periods; the residual component in turn has
contributed to a reduction of 0.02% of national poverty. We see thus that growth was
accompanied by a reduction in inequalities and has reduced poverty.