are about 85 percent of the developing world total (PovcalNet, 2015). The population weighted average poverty rate among the 71 countries as of the second survey year is 16.8 percent, fairly close to the developing world average poverty rate of 15 percent in 2012 (PovcalNet, 2015).

# **2.1. Growth of the Bottom 40 Percent vs. Total Population**

The shared prosperity index and its focus on the bottom 40 percent of the population is a refinement to the long‐standing and implicit focus on economic growth for the total population as a condition for poverty reduction (Beegle et al., 2014). In this light, a simple comparison of the two growth rates, one for the bottom 40 percent and the other for the total population,<sup>7</sup> is a natural starting point to understand the state of shared prosperity. Of the 94 countries in the GDSP, the bottom 40 growth rate was higher than the total growth rate in 56 countries (Table 1). Of those, 20 countries experienced a bottom 40 growth rate greater than 4 percent a year (top right quadrant).<sup>8</sup> These are countries in which strong economic growth was shared with the poorer segments of the population. An additional 27 countries shared the gains of economic growth to a larger extent with the poorer segments of the population but growth overall was lower than 4 percent annually. On the contrary, in 18 countries, the bottom 40 growth was positive, but lower than the total growth. Finally, 29 countries experienced a negative bottom 40 growth rate and, in more than two‐thirds of these countries, the mean consumption/income of the bottom 40 percent contracted even more than that for the total population.

**Table 1: Income growth of the bottom 40 percent (G40), circa 2007‐2012**

||Annualized grow<br>|th in mean consumption or inc<br>|ome of bottom 40<br>|Total|
|---|---|---|---|---|
||Bottom 40 Growth < 0|0 < Bottom 40 Growth < 4%|Bottom 40 Growth > 4%||
|Bottom 40 Growth ><br>Total Growth|9|27|20|56|
|Bottom 40 Growth <<br>Total Growth|20|12|6|38|
|Total|29|39|26|94|
|Source: Global Databa|se of Shared Prosperity (|GDSP), circa 2007‐2012.|||

Figure 1 is a scatter plot of the bottom 40 growth and the total growth rates. A positive and significant correlation coefficient of 0.90 (p‐value < 0.001) indicates that the bottom 40 growth is strongly correlated with the total growth and that prosperity is often shared when economy grows as a whole. This finding is consistent with Dollar et al. (2013). At the same time, there is a non‐negligible variation in this relationship and the correlation between the two growth rates are weaker at a higher growth range. For example, the correlation coefficient for the 29 countries with a negative bottom 40 growth rate is 0.78 (p‐value <0.001), while it is 0.59 (p‐value < 0.001) for 39 countries with a bottom 40 growth rate between 0 to 4 percent, and 0.35 (p‐value =0.08) for 26 countries with a bottom 40 growth rate greater than 4 percent. Country specific analysis is needed to detect possible contributors of the inclusiveness of growth.

> 7 For brevity, we refer to these growth rates as the bottom 40 growth rate and the total growth rate, respectively, regardless of the underlying welfare indicator, consumption or income.

> 8 As suggested in Narayan et al. (2013), the threshold of 4 percent is an arbitrary measure of separating “good” growth performers from the rest and is kept here to maintain consistency and comparability to previous results.

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