A simple metric for inclusive growth with illustrations from India (1983-2012)

Abstract

“Inclusive growth” has emerged as a catch-all term for describing the distributional consequences of economic growth. However, there are no widely accepted metrics to quantify inclusive growth. We develop a simple metric based on Atkinson’s classic inequality measure. Our metric, like the original Atkinson measure, is fully decomposable and allows for both ‘horizontal’ and ‘vertical’ characterizations of inclusive growth. We illustrate our framework using consumption expenditure data from several waves of nationally representative data from India (1983-2012). Overall, growth has been sporadically inclusive with the rural sector marginally more inclusive. However, the urban sector shows relatively greater social group inclusion. Vertical decomposition indicates that middle deciles in the urban sector have experienced longer periods of inclusive growth.