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Getting the long-term macro development perspective right: diversification of the economy with strategic investment and increased protection from risks

Working papers

Written by Andrew Shepherd, Chiara Mariotti

The purpose of this working paper is to explore a menu of policy recommendations that developing country governments can use to think through their policy-making decisions and ensure the poorest people participate in economic growth on good terms, such that they can sustainably escape poverty.

Key messages

  • Pro-poorest growth can be driven by investment in labour-intensive industry, supported by institutional measures to ensure fair competition in the market and a voice for business with government. However, institutional measures are not always sufficient to generate such investments.
  • The gains from pro-poorest growth can be eroded if there is inadequate protection from major shocks—in particular impoverishing ill-health and food price inflation. There is a need for adequate health coverage and attention to casual wages as well as food prices.
  • Regional integration and cross-border trade can be powerful supports to pro-poorest growth. Here, South-East Asian countries have had a significant advantage over East African countries.
  • Cross-border migration of unskilled labour may assist pro-poor growth; it is internal migration that is most likely to contribute to pro-poorest growth. In both cases, supportive policies can reduce the costs and increase the returns to migration.
Andrew Shepherd and Chiara Mariotti