providing empirical input into the debate by (i) studying the aggregate and sectoral employment/productivity profile of growth and its correlation with observed poverty changes, and (ii) going beyond the study of the link between the profile of growth and poverty and into the provision of some preliminary evidence as to which market conditions and economic policies help in explain the observed profile of growth.

The paper is structured as follows: section 1 presents a brief review of the theoretical and empirical evidence on the link between poverty and growth patterns. Section 2 discusses the methodology and data. Section 3 illustrates the stylized facts on the correlation between the growth patterns and poverty. Section 4 analyzes the effects of growth patterns on poverty and discusses which labor market and macroeconomic conditions explain the observed growth patterns. Section 5 presents the paper’s conclusions.

# **1 Conceptual Framework:  Why Would the Sectoral Growth Pattern or Its Employment Profile Matter for Poverty?**

As mentioned above, there is a growing literature that is studying which factors (such as sectors, initial inequality or endowments, government interventions, or the sectoral pattern of growth) explain the effectiveness of growth in reducing poverty.<sup>5</sup> Among this literature an important set of papers has concentrated on the sectoral growth pattern. For example, Loayza and Raddatz (2006) find that growth in unskilled intensive sectors contributed to changes in poverty, after controlling for average growth. Ravallion and Datt (2002) link sectoral value added growth to poverty changes in India, and find that growth in agriculture helped reduce poverty while growth in manufacturing did not. Satchi and Temple (2006) show how dualism (created by frictions rather than by institutionally set wages) may play an important role in how the growth pattern translates into rises in employment and wages, and that while growth in agriculture potentially raises poverty, urban growth reduces poverty.<sup>6</sup> Other policy-oriented research has reached similar conclusions. For example, World Bank (2005) studied 11 countries and found evidence that access to non-farm rural employment and informal urban employment eased the poor’s participation in the growth process. Other papers have concentrated on understanding the role of employment or productivity in shared growth. World Bank (2005) found that in 3 of the 14 countries studied pro-poor growth was associated with more labor-intensive growth.<sup>7</sup> In a related analysis, Islam (2004) uses a cross-country sample of 23 developing countries to find out whether the employment intensity of growth in manufacturing contributes to explain poverty reduction, but finds that results are not robust to the inclusion of per capita GDP growth. Prasada Rao et al. (2004) find that the significance of output per worker in explaining poverty reduction is not robust to the inclusion of the log of GDP per capita, or the estimation period.<sup>8</sup> More

> 5 See, for example, Dollar and Kraay (2002), Kraay (2006), Ravallion (2005), Ravallion and Chen (2004), Ravallion and Datt (2002), Loayza and Raddatz (2006), and Bourguignon (2002).

> 6 The authors do not explicitly consider poverty outcomes, but rather the effects of different types of growth on wages. 7 These three countries were Indonesia, Vietnam, and Tunisia.

> 8 The results suggest that the mentioned variables do not have an effect independent of the effect they have on GDP per capita, or alternatively that they are a proxy for it, when included on their own.

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