Political Settlements and Immiserizing Growth Episodes

Abstract

Economic growth in developing countries is an ‘episodic’ phenomenon, with countries undertaking discrete shifts from periods of low to periods of high growth and vice versa. Not all growth acceleration episodes lead to reductions in poverty, and there is wide variation in the relationship between growth and poverty across episodes of growth of the same magnitude or duration. This chapter shows that several cases of growth acceleration episodes may be defined as episodes of immiserizing growth, in that poverty either increases or remains roughly the same across the duration of these episodes. Similarly, the chapter shows that not all growth deceleration episodes lead to increases in poverty. A political economy explanation is presented for episodes of immiserizing growth, focusing on the nature of the political settlement, and in particular on the distribution of power. We find that settlements with dispersed vertical power can lessen the likelihood of immiserizing growth episodes. We also find that dispersed horizontal power is not necessarily conducive to pro-poor growth episodes.