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Poverty reduction

Participating in growth

by Eleonore von Bothmer

In brief

Job opportunities matter: a Ugandan basket maker

Job opportunities matter: a Ugandan basket maker

Anyone in a developing country who gets the chance of improving their livelihood is normally going to make use of it. What matters for sustainable reduction of poverty is therefore not simply economic growth, but just as much the ability of poor households to contribute to growth and to profit from it. SIDA, the Swedish government agency for development cooperation, has developed a toolbox for analysing such issues in a country.

For a little more than a year now, the Swedes have been working with something they call Integrated Economic Analysis (IEA). This approach combines various types of economic analysis, linking micro- and macroeconomic perspectives. The aim is to understand what development processes are underway in a country and what part poor people play in them. The focus is on constraints the poor face and any opportunities they may have to take their fate into their own hands. According to SIDA’s chief economist, Per Ronnås, the challenge lies both in creating long-term foundations for growth, for instance, by spending on education and health and in creating better opportunities for poor people to use their skills and other resources productively.

IEA assesses job opportunities, the business climate and the macroeconomic situation. SIDA considers employment the crucial parameter because jobs are the most important way for the poor to earn money. However, business and macroeconomic conditions are also taken into account, as they too have implications for opportunities for employment and income generation.

According to Ronnås, the IEA method is sensitive to the special characteristics of individual countries and even permits differentiation between groups. It is possible, for example, to examine the obstacles encountered in economic life by women and the ways in which women are disadvantaged even if they are highly qualified. IEA also takes account of the influence that migration has on growth and poverty reduction (also note review essay on page 160).

Ronnås explained the IEA concept at the headquarters of German Technical Cooperation (GTZ) in Eschborn in late February. Stressing that poverty is a complex phenomenon that can be addressed only by a holistic approach, he told his audience that the aim must be to “merge diverse analyses into one”. One of the key strengths of IEA is as a tool for dialogue, GTZ staff was told, particularly as such dialogue often leads to new approaches to policy-making.

Ronnås recommends involving both the governments of developing country and local actors in the analysis from the outset, establishing in consultations which aspects they consider particularly important and which data are needed. There is basically nothing problematical about analysing existing data bases “under the IEA microscope”, he says, but it is important never to lose sight of the poor.

SIDA has conducted an IEAs in several countries, including Kenya, Cambodia, Ugan­da, Albania and Tajikistan. More studies are in the pipeline for Guatemala, Bosnia-Herzegovina, Kosovo and other countries. (eli)