Interrogating sub‐Saharan Africa's high economic growth rate and low poverty reduction rate: A poverty paradox?

• Published date: 01 February 2023
• Author: Olumide O. Olaoye
• Date: 01 February 2023
• DOI: http://doi.org/10.1002/pa.2851

RESEARCH NOTE

Interrogating sub-Saharan Africa's high economic growth

rate and low poverty reduction rate: A poverty paradox?

Olumide O. Olaoye

Thomas Adewunmi University, Oko, Nigeria

Correspondence

Olumide O. Olaoye, Thomas Adewunmi

University, Oko, Nigeria.

Email: oluweds34@gmal.com;olumide.

olaoye@tau.edu.ng

Sub-Saharan Africa's (SSA) high economic growth coincides with an increase in the

level of poverty. In a panel of 40 SSA countries over a 30-year period, while account-

ing for the potential spillover effect of poverty in the region. The study found that

economic growth recorded over the years has not translated to poverty reduction,

particularly, in resource-rich economies of SSA. The result also shows that income

inequality worsens the effect of economic growth on poverty and that the poverty-

reducing effectiveness of growth varies considerably across sectors, across space,

and over time. The research findings suggest that governments across the region,

particularly, in oil-exporting countries in SSA must diversify the economy away from

oil (toward the service sector) to reduce poverty in the region.

KEYWORDS

cross-sectional and spatial dependence, economic growth, economic shrinking hypothesis,

poverty, poverty paradox hypothesis, services sector

1|INTRODUCTION

African countries have enjoyed strong economic growth over the last

few decades, especially, in the last 10 to 15 years (ECA, 2015;

Shaw, 2015; see also Figure 1). Available evidence shows that over

the last few decades, after Asia, Africa is the second-fastest growing

economy in the world (ACBF, 2017), but the question is, is there a

trickle-down effect of the growth benefits on the poor? Although the

early theory of economic development stresses that economic growth

automatically benefits the poorer members of society or the needy

(see Olaoye, 2022 (forthcoming); Vijayakumar, 2013), and the trickle-

down mechanism allows all citizens to benefit from economic growth

(even if not equally), and therefore reduces the level of poverty

(Kakwani & Pernia, 2000; Mulok et al., 2012), however, by the end of

the 1960s, the trickle-down effect of the growth benefits automati-

cally toward poor people did not appear, especially in developing

countries (ACBF, 2017). That is, in spite of the high economic growth

rate, living conditions in sub-Saharan Africa (SSA hereafter) have not

improved as poverty levels remain high (see Figure 2), with more than

half of the extremely poor people living in SSA (see Figure 3).

To put it more clearly, while there has been a significant decline

in global poverty, a number of SSA countries have experienced little

or no poverty reduction (see Figure 4). In 2013, the UN classified

33 African countries as part of the world's poorest countries, with

15 Asia countries and only 1 Latin American country in that group.

Disturbingly, still, 32 of the 40 countries with the lowest human

development index are in Africa (UNDP, 2013). Similarly, Arndt et al.

(2016) note that, although growth accelerated in 16 major sub-

Saharan African countries, corresponding to nearly 75% of the total

population, the authors, however, argued that these countries are yet

to channel the benefits of economic growth into the pockets of the

poor. The trend is consistent with the “Poverty Paradox

Phenomenon.

1

”

Consequently, some authors (see Breunig & Majeed, 2019; Fosu

& Gafa, 2020; Mulok et al., 2012; Son & Kakwani, 2004) have argued

that economic growth alone may be a blunt tool for poverty reduc-

tion. They note that economic growth is necessary but not sufficient

for poverty reduction. More precisely, these authors assert that eco-

nomic growth models that account for low income and inequality but

fail to address poverty may not be adequate. The recent interrogation

into whether economic growth is sufficient for poverty reduction is

1

Poverty paradox implies the persistence of poverty even when economic growth and

development is achieved, particularly, in resource-rich countries.

Received: 23 November 2021 Revised: 3 November 2022 Accepted: 12 December 2022

DOI: 10.1002/pa.2851

J Public Affairs. 2023;23:e2851. wileyonlinelibrary.com/journal/pa © 2022 John Wiley & Sons Ltd. 1of17

https://doi.org/10.1002/pa.2851

also influenced by the fact that so many of the world's poor now live

in middle-income countries (which, by definition, have experienced a

reasonable amount of economic growth) (see Mulok et al., 2012).

Thus, the general consensus in the literature is that alongside growth,

the government needs to put in place policies that seek to redistribute

income and assets equitably. That is, a policy agenda that addresses

both economic growth and distributional concerns would lead to

equity and a reduction in poverty levels.

Similarly, a new line of theoretical insight into the high rate of

poverty in SSA has emerged—The Economic Shrinkage Hypothesis

(see Andersson, 2019; Broadberry & Wallis, 2017

2

; Olaoye

et al., 2021). The authors assert that developing countries remain poor

because they shrink too often. Consequently, scholars and policy-

makers have considered replacing economic growth as a central

theme of research in development economics with poverty reduction

(Ferreira et al., 2010; Sindzingre, 2008), indicating that the focus of

development economics may have shifted and the agenda of govern-

ments may have been narrowed to address the prevalence of poverty,

especially in developing countries. This shift represents a crucial turn-

ing point in the conceptual framework of development economics.

Thus, the agenda to eradicate poverty birthed the Millennium

Development Goals (MDGs) for example, “reducing world poverty by

FIGURE 1 Trends of real GDP per capita growth rate for sub-Saharan Africa: Source: IMF (2019)

FIGURE 2 Trends of real GDP per capita and poverty in

developing countries

2

Broadberry and Wallis (2017) found that improved long-run economic performance in

developed economies has occurred primarily through a decline in the rate and frequency of

shrinking.

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