# **VI. Growth Incidence Curves**

Average consumption in Africa as a whole increased by approximately 15% (or 0.92% per annum) between 1993 and 2008 (Table 3, Panel H), which is a very low growth performance. In terms of average consumption expenditure, resource-rich countries have performed better than the overall African average. Average consumption in upper middle/high income countries grew faster than in lower middle income countries, while there was a decline in low income countries.

The African (anonymous) growth incidence curve (GIC) (Figure 4) shows how the growth in mean consumption expenditure of less than 1% per year was distributed along the distribution.<sup>37</sup> For example, it shows how the average consumption of the bottom 5% in 1993 compares with the average consumption of the bottom 5% in 2008. Growth was particularly high for the top 5% of the distribution, whose average consumption grew at around 2% per year. The GIC is upward sloping throughout, so higher income groups benefited relatively more from growth between 1993 and 2008, and inequality increased. Consumption expenditure declined for the poorest 10% of Africans. The growth rates for all ventiles except the very top ventile were less than the growth of the mean, shown by the dashed red line. Furthermore, the bottom 30% of the distribution had a negative consumption growth and there were nearly no gains between the 30<sup>th</sup> and 40<sup>th</sup> percentile groups. The GIC drawn over the original decile groups without imputing the Lorenz curve also exhibits the same upward sloping shape (not shown here). When we use the balanced sample (i.e. the same set of countries in 1993 and 2008), the growth rate for the bottom 5% becomes positive, but it is important to note that the result of stagnation for the bottom 30% remains unchanged (not shown here).

Figure 5 splits up this 15-year period into the five-year growth spells between the intermediate benchmark years. The upward-sloping shape of the 15-year GIC appears to be mostly driven by the period between 2003 and 2008, while the gain at the very top occurred mostly between 1998 and 2003. We also show the ten-year GIC between 1998 and 2008, since the constituent five-year periods show almost completely opposite growth patterns.

By comparison, the growth in mean consumption expenditure was much higher in EAP over this period. Between 1992 and 2007 the EAP mean increased by 6% per annum, with the poorest part of the distribution growing at 4% per annum. While the growth process was also pro-rich in EAP (i.e. the GIC is upward-sloping), the (already modest) consumption growth in Africa appears to be distributed even more unequally, especially at the very top.

> 37 Our definition of the GIC follows Lakner and Milanovic (2015) but is slightly different from the original definition by Ravallion and Chen (2003) who plot the growth rate of consumption of a particular fractile (not the fractile group). In other words, the GIC as defined by Ravallion and Chen is derived by inverting the cdf and taking the growth rate. Hence it offers a straightforward test of first-order stochastic dominance. The two approaches differ mostly in the tails and we would argue that our approach is more informative. In the original GIC drawn over ventiles, the highest income group would be the 95th percentile. This curve would fail to show any income growth that occurs within the top 5%, while our approach would average over this.

15