Does the Composition of Growth Matter for Poverty Reduction in Sub-Saharan Africa?

Several studies have investigated the impact of the composition of growth on poverty reduction at different sectoral levels. However, few or no studies have jointly examined this impact in Sub-Saharan Africa (SSA) for evidence-based policy making. Relying on a three-sector theoretic framework, this study adopted the ‘two-step system’ generalized method of moments (Sys-GMM) model (rather than the conventional ‘first-difference’ approach) to determine the impact of the composition of growth on poverty reduction. The model accounted for the three sources of endogeneity—dynamic endogeneity, heterogeneity, and simultaneity, and the issue of over-identification of parameters. Furthermore, the study adopted the aggregated and disaggregated annual sectoral growth rate of sectors rather than the conventional sectoral output share as a measure of sectoral performance. The findings suggest that agriculture, mining and utility, and transport and communication were the main drivers of poverty reduction, with the highest contribution coming from the agricultural sector. The strongest intersectoral linkage was between the service and agricultural sectors. A policy framework that supports an increase in investments in these sectors will significantly reduce poverty conditions in the SSA.