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Millennium Challenge Corporation; United States of America

MCC Evidence: Want to help the poor? Focus on economic growth

MCC was created to reduce poverty through economic growth in poor countries that are well governed compared to their peers. The concept was based on a fairly simple premise: a country’s support for good policies—sound economic and social policies and democratic governance—is a big part of what ensures inclusive economic growth that reaches the poorest segments of society. So by focusing on economic growth in countries with good governance, U.S. development dollars can have a bigger impact on poverty reduction.

We are often asked whether our investments benefit the poor. We continue to learn—and share—our specific program results in our independent evaluations. But to get an overall sense of how growth benefits the poor in MCC partner countries, I took a look at the poverty-reduction-through-growth experience in MCC and non-MCC countries to see how the incomes of the poor fared compared to a country’s average income growth (the full report is available here).

Here’s what I did:

I looked at growth and poverty reduction data for MCC candidate countries (those that do not exceed per-capita annual income levels), MCC eligible countries (those that passed the MCC scorecard), and MCC partner countries (those that are selected, reselected, or in compact implementation in a given year). And I compared growth in incomes for the bottom 20 and 40 percent of the population with average income growth.

Here’s what I found:

On average, countries that perform well on MCC’s eligibility scorecards perform at least as well or better on inclusive growth than countries that fail our scorecard. In short: growth in MCC partner countries includes the poor.

Graphs 1 – 3 1

This suggests that good governance, investing in citizens, and economic freedom enhance the likelihood that the poor in MCC partner countries are not left behind.

At MCC, we are constantly working to ensure that our programs promote inclusive economic growth, including by studying how social and gender inequalities in our partner countries affect access to assets and markets.

But my empirical research is encouraging because it affirms that MCC partner countries tend to already be countries in which overall economic growth is shared. And more broadly, this research provides an important reminder that governance plays a critical role in the global fight against poverty.

Footnotes
  • 1. Ospina, S. “Background Paper On Inclusive Growth Concepts In the Context of the Millennium Challenge Corporation”, MCC, Internal Report, 2014