Poverty reduction in Africa

A recent paper by Pinkovskiy and Sala-i-Martin (NBER, Feb 2009) suggests that Africa might be well on its way to reach the first Millenium Development Goal in halving poverty (1 USD PPP per day) by 2015. This time series is from one of the many figures in the rather descriptive paper:

By disaggregating the data, the authors show that most of the African countries did see a steady decline in poverty rates. The negative exception here is Congo-Zaire, which saw a growth collapse and rise in poverty (GDP per capita in the 70s was three times higher than today). The aggregate African negative trend seems to be strongly driven by this influential outlier case. Removing the case, the African story seems to be much more encouraging.

Interestingly, the strong decline in poverty rates beginning 1990s coincides very well with the business cycle synchronization and the onset of Chinese FDI flows to Africa.

As always, the correlation could be driven by omitted variables and - almost a mantra - does not imply causation. Nevertheless, it is interesting relating African poverty reduction to the Chinese involvement, particularly as this is often seen as being a harmful thing.

PS: Credits go to Dr Green!