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Chapter 1. Inclusive Growth in Mali2

Author(s):
Christian Josz
Published Date:
October 2013
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This chapter studies Mali’s performance in poverty reduction by analyzing household data from surveys in 2001, 2006, and 2009–10. Mali’s share of poor households has decreased substantially during the past decade. While the reduction in headcount poverty was more pronounced from 2001–06, when all sectors of Mali’s economy grew at a similar pace, economic growth was mainly beneficial to the very poor during 2006–10, when agricultural production boomed.

Economic Growth was Inclusive during the Past Decade

Fairly high growth led to substantial poverty reduction. After a decade of relatively low per capita growth, real GDP per capita growth picked up and averaged 3.2 percent during 2001–10. Although real GDP growth has been volatile, Mali’s share of poor households has decreased substantially from 55.6 percent in 2001 to 43.6 in 2010 taking into account the national poverty line.3 Also in comparison with other countries, Mali’s poverty reduction was remarkable. While per capita growth was comparable in Mali and sub-Saharan Africa during 2001–10, poverty reduction was significantly stronger in the former. This is also shown by higher elasticity of poverty reduction relative to GDP growth in Mali than in comparable countries (Figure 1).

Figure 1.Inclusiveness of Growth in Mali

Sources: IMF staff estimates, Malian authorities, World Bank staff estimates, World Development Indicators, and World Economic Outlook database.

Note: SSA = sub-Saharan Africa.

Growth in economic activity has been largely inclusive, meaning that it has not been associated with an increase in inequality (Rauniyar and Kanbur, 2010) or with a reduction in the share of the bottom quintile of the income distribution (International Monetary Fund [IMF], 2010). During 2001–10, the growth incidence curve—depicting the changes in household consumption according to consumption percentiles—features a clear downward slope, implying an increase in the consumption of poorer households relative to richer households. Real consumption for households below the poverty line increased by 25 percent (“pro-poor growth”), while average consumption grew by 7.5 percent.

Poverty in Mali is mainly rural and concentrated among farmers. The results from a regression analysis pooling data of three household surveys (2001, 2006, and 2010) suggest that being a farmer implies a lower consumption by 33 percent (Table 1); in 2010, this effect was less pronounced, at 24 percent, reflecting an overall improvement of farmers’ consumption relative to the rest. Subsequently, urban poverty has increased in the second part of the decade, mainly because of migration to Bamako (Figure 2). Further, a higher number of household members and an older age of the household head affect consumption negatively, while civil servants are clearly better off than others. The results of Table 1 are broadly similar to regression analyses performed on comparable sub-Saharan countries (IMF, 2011). However, the rural-urban divide seems more pronounced in Mali, and household size and age have a positive influence in other countries studied in IMF (2011) as opposed to a negative effect in Mali. The latter might be partially explained by Mali’s higher population growth and children per household than in comparator countries.

Table 1.Mali: Determinants of Household Consumption
(1)(2)(3)
Household size−0.0161***−0.0161***−0.0161***
Age−0.0587***−0.0629***−0.0632***
Sex−0.00994−0.00725−0.00403
Urban0.284***0.283***0.284***
Farmer−0.279***−0.327***−0.282***
Civil servant0.299***0.307***0.297***
Self-employed0.02030.02440.0194
Unemployed−0.0714***−0.0659***−0.0676***
Year 20060.0337***−0.002830.012
Year 20100.171***0.116***0.191***
Farmer*20060.0553***
Farmer*20100.0868***
Urban*20060.0805***
Urban*2010−0.0879***
Constant12.33***12.37***12.34***
Observations18,45418,45418,454
Sources: IMF staff calculations and Malian authorities.Note: *, **, and *** indicate statistical significance at the 90, 95, and 99 percent confidence intervals, respectively.
Sources: IMF staff calculations and Malian authorities.Note: *, **, and *** indicate statistical significance at the 90, 95, and 99 percent confidence intervals, respectively.

Figure 2.Mali: Patterns of Poverty, Poverty Reduction, and Obstacles

Sources: IMF staff estimates, Malian authorities, and World Development Indicators.

Note: SSA = sub-Saharan Africa.

Agricultural Growth Helped the Very Poor, while Balanced Growth in All Sectors Reduced Overall Poverty

Poverty reduction was higher in the first part of the decade (2001–06) than during the second part (2006–10). While the magnitude of real GDP growth was broadly comparable throughout the decade, the number of households below the poverty line decreased more strongly during the first part. This is also reflected in a higher elasticity of poverty reduction to economic growth (Table 2). Moreover, in the first part of the decade Mali made more substantial progress toward achieving the Millennium Development Goals than in the second part of the decade.

Table 2.Mali: National Accounts and Household Survey Data
200120062010
National accounts1(period average annual growth rates)
Real GDP5.14.9
Real GDP per capita2.62.3
Real agricultural output4.68.2
Real industry output5.9−1.9
Real services output5.75.7
Household surveys(in percent)
Poverty incidence (national poverty line)55.647.443.6
Elasticity of poverty w.r.t growth−1.8−1.5
World Development Indicators2
Mortality rate under-5 (per 1,000)217.3199.5191.1
School enrollment primary (% net)44.463.172.9
Sources: IMF staff, Malian authorities, and World Development Indicators.

The national accounts number reflect the averages between 2001 and 2006 and between 2006 and 2010, respectively.

School enrollment in 1999 and 2009; mortality rate in 2009.

Sources: IMF staff, Malian authorities, and World Development Indicators.

The national accounts number reflect the averages between 2001 and 2006 and between 2006 and 2010, respectively.

School enrollment in 1999 and 2009; mortality rate in 2009.

The consumption of the poorest rose and inequality decreased more strongly during 2006–10. As depicted in the growth incidence curves in Figure 2, the slope of the 2006–10 curve features a pronounced downward slope with steepening tails. Hence, the poorest quintile of the population benefited most, while the richest quintile lost relative to the rest of the population. The growth incidence curve of 2001–06 still implies higher consumption growth for the bottom half of households, but it is flatter and the poorest households are not better off than the average.

During 2001–06, the economy grew at an equal pace in all three sectors, while manufacturing contracted and agricultural production boomed during 2006–10. Particularly good weather conditions helped agricultural output in 2006–10 to increase by 8 percent on average per year. As the very poor are mostly farmers, their consumption basket expanded during this part of the decade. But as most farmers produce on a subsistence level, these gains in agricultural production could not be translated into an overall increase in production and employment elsewhere. Hence, the impressive growth in agriculture during 2006–10 allowed the very poor to improve their lives relative to the rest of the population, but the balanced growth during 2001–06 helped more households to escape poverty.

Policy Implications

Improving agricultural production is key to helping the poorest of the poor. Given the current opportunities—high commodity prices, urbanization with increasing demand for food and a move away from subsistence, climate change, and Mali’s potential of irrigated land—investments in agriculture can diminish the poverty gap and promote poverty reduction. Possible measures include (IMF et al., 2011):

  • Building and maintaining irrigation infrastructure (less than 15 percent of potentially irrigated land is actually irrigated)
  • Modernizing family farming and subsistence agriculture to agribusinesses and food processing
  • Making public sector support for agriculture more efficient
  • Improving access to finance

Balanced and diversified growth, however, is key to sustained inclusive growth and overall poverty reduction. To achieve sustained growth, Mali’s infrastructure bottlenecks need to be removed and urban employment and labor mobility enhanced. As productivity in urban areas is usually higher than in rural areas, some studies suggest building geographical clusters and focusing on a few urban centers with pilot policies (Otsuka and Sonobe, 2011). Further, an important challenge remains the two-dimensional diversification of exports: the export base—from mainly gold and cotton to mangos, cereals, and cattle—as well as export directions, expanding from local to urban and regional markets.

References

    International Monetary Fund2010Regional Economic Outlook: Asia and Pacific Consolidating the Recovery and Building Sustainable Growth (WashingtonOctober).

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    International Monetary Fund2011Regional Economic Outlook: Sub-Saharan Africa Sustaining the Expansion (WashingtonOctober).

    International Monetary Fundet al.2011March Conference on Challenges and Opportunities of Mali (Bamako). Available via Internet: http://www.imf.org/external/french/np/seminars/2011/mali/index.htm.

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    OtsukaKeijiro and TetsushiSonobe2011A Cluster-Based Industrial Development Policy for Low-Income Countries.Policy Research Working Paper WPS5703 (Washington: World BankJune).

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    RauniyarGanesh P. and RaviKanbur2010Inclusive Development: Two Papers on Conceptualization, Application, and the ADB Perspective.Working Papers 57036 Department of Applied Economics and Management (Ithaca, NY: Cornell University).

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