Why Has Growth Not Trickled Down to the Poor? A Study of Nigeria

Abstract

Despite impressive economic growth and major economic reform policies the search for poverty-reducing growth strategies remains a perennial question in many developing countries as poverty persists unabated. This motivates the current study to investigate empirically growth-poverty nexus in Nigeria spanning between the period 1970 and 2017. The paper attempted to answer the question: why has growth not trickled down to the poor? Time series econometrics were applied to test the cointegrating, short- and long-run dynamics among the variables. The results obtained revealed that growth trickled down to the poor only when high rates of employment growth accompanied high rates of economic growth. In addition to employment, the result also revealed that the form of capital formation, rather than its absolute value, appears to matter to the question of why has growth not trickle down to the poor. Thus, economic growth policies that promote an increase in income in conjunction with a high rates of employment growth are more effective in combating poverty than those that focus only on average income levels.