**Figure 3: Income growth of bottom 40 percent,** **_circa_ 2005-10** Countries classified by GNI per capita

<!-- Start of picture text --> 70%<br>60%<br>50% > G*<br>30% > G*<br>40%<br>46%<br>30%<br>> G*<br>> G*<br>23%<br>20% < G* 33%<br>33%<br>10% < G* < G*<br>18%<br>13%<br>5%<br>0%<br>< 4% > 4% < 4% > 4%<br>G40: Low & Lower-middle - G40: Upper-middle & High<br>income income<br>% of countries in each group<br><!-- End of picture text --> _Note:_ 1) G*: annual growth in per capita income of overall population. 2) World Bank classification of countries, by 2012 GNI per capita (Atlas method): low income, $1,035 or less; lower middle income, $1,036 - $4,085; upper middle income, $4,086 - $12,615; and high income, $12,616 or more. _Source:_ PovcalNet as of September 20, 2013 and micro databases from WB regional teams for Latin America and Europe and Central Asia.

How the two groups differ in overall performance in shared prosperity is best captured by two statistics from Figure 3. From a normative perspective, one can assume that unambiguously strong performers are those countries where incomes of the poor grow rapidly and faster than the mean, namely countries where G40 exceeds 4 percent annually <u>and G*. These “unambiguously strong performers” account for 46</u> percent (18 of 39) of upper middle and high-income countries, but just one-third (13 of 40) of low and low-middle income countries. Conversely, 33 percent (13 out of 40) of low and lower-middle income countries had G40 lower than 4 percent and below G*, compared to just 13 percent (five out of 39) of upper-middle and high income countries. These differences do not seem to be driven by systematic differences in inequality trends between the two groups of countries – G40 exceeding G* is seen for similar proportions of both groups of countries. For both groups, G40 is more likely to exceed G* when it is high (above 4 percent), suggesting a positive correlation between inequality reduction and G40 for both groups of countries.

# _Comparing performance across countries – caveats and nuances_

Certain qualifications are however important to note about the results above. _Firstly,_ the classification of countries by GNI per capita of 2012 could have resulted in the exclusion of countries that had started the period in the poorer group but since achieved rapid economic growth to “graduate” out, which could have biased the median G40 (and G*) of the lower and lower-middle income group downward. This turns out to be less of a concern though. G40 has a positive correlation with (log of) GDP per capita in the _initial_ period (0.28), which is only slightly lower than its correlation with (log of) GNI per capita of 2012.<sup>11</sup> Thus on the average, countries that were richer _at the outset_ appear to have had higher income growth for the bottom 40 percent than poorer countries. _Secondly,_ since household income (as opposed to consumption) growth is used for a much higher share of countries in the richer group than in the poorer group, it is possible that part of the difference in growth rates between the two groups is driven by how the rates are measured. While the data shows some risk of this happening, preliminary analysis suggests 7