# **Introduction**

Haiti has a vision to become an emerging economy by 2030, but remains for the moment one of the poorest and most unequal countries in the world. The country’s GDP per capita fell by 0.7 percent per year on average between 1971 and 2013. While overall income growth is a necessary condition to reduce extreme poverty, as in many low-income economies, it will not be sufficient in the case of Haiti. Even when experiencing periods of economic growth, the country has not been able to share equally the proceeds of this better performance among its population. Policies to ensure more inclusiveness are hence needed.

More generally, policy focus would be needed to meet the World Bank’s Twin Goals of promoting shared prosperity and ending extreme poverty by 2030.<sup>1</sup> Meeting these Twin Goals under inequality-neutral growth would require very optimistic assumptions about growth rates going forward.<sup>2</sup> This calls for a prioritizing of policies that are expected to be especially pro-poor. But what would be the measures most promising to deliver this faster growth for lower income groups? Once identified, could they be ranked to assist in setting priorities?

Detailed country data and in-depth analysis would usually be required to begin selecting a set of policy priorities, a challenge for low-income countries such as Haiti. Long time-series needed to identify such relationships are often not available.<sup>3</sup> As an alternative, taking the opportunity of a growing availability of more standardized country data on income distribution, this paper examines the drivers of the income of the two poorest quintiles, drawing on the panel data of 117 countries over the period 1967 to 2011 used in Dollar et al. (2016).

The results suggest that maintaining macroeconomic stability as well as investing in human and physical capital would not only accelerate overall economic growth, but benefit more particularly the poorest segments of the population. This paper confirms the central role overall economic growth should play in any strategy to reduce poverty. Its results suggest, however, that in addition policy makers may have instruments to tweak the distribution of the benefits of faster economic growth in favor of the households at the bottom of the income distribution, ensuring that everyone can live up to their potential. This paper shows that there thus not need be a trade-off between inequality and growth. Economies can foster faster growth while also increasing inclusiveness.

The paper proceeds as follows: Section I provides some characteristics of Haiti; Section II discusses the literature on income drivers; Section III presents our approach, the data, and the

> 1 The World Bank has adopted the Twin Goals of ending extreme poverty (defined as a fall in the percentage of people living with less than $1.25 a day to no more than 3 percent globally by 2030) and promoting shared prosperity (defined as income growth of the bottom 40 percent of the population in every country).

> 2 Ravallion (2013).

> 3 See Singh and Weber (1997), for example, for a discussion on the influence of the composition of public spending on growth in Switzerland based on time-series going back to the 1950s.

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