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The Growth-Poverty-Inequality Nexus in Malawi: A recomputation

Chirwa, Themba (2022): The Growth-Poverty-Inequality Nexus in Malawi: A recomputation. Forthcoming in:

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The growth-poverty-inequality hypothesis depicts an inverse relationship between economic growth and poverty and an ambiguous relationship with inequality. However, the official national statistics in Malawi reveal a positive association between economic growth and poverty, falling from 52.4% in 2004 to 50.7% in 2019. The official results also depict that Malawi faces big income gaps evidenced by inequality measures of more than 0.40. We noted several computational errors in estimating the official poverty and inequality measures. They include zero standard errors, significant outliers in consumption aggregates, fewer primary sampling units used, and the median approach to deal with outliers. After observing inconsistent trends between the official National Statistics Office and economic growth, the study aimed to recompute poverty and inequality measures to correct such errors. Contrary to the official results, poverty in Malawi increased significantly from 48.3% in 2004 to 61.5% in 2019, depicting an inverse relationship with economic growth. The approach adopted also downgraded the inequality trends from a big income gap to adequate income equality. The results confirm that the growth-poverty-inequality hypothesis holds in Malawi. The study, therefore, supports the need to ensure data reliability to aid policymakers in making sound policy decisions.

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