Policies towards poverty: Ghana and Tanzania in the 1990's
Anaysis of the Growth Rate
So far we have focused on how growth differed across different types of household, classified either by the occupation of the household head or by their position in the distribution. We turn now to ask how important have been changes in the proportion of households in the different occupations. One theme in policy reform across the two countries has been the need to contract the public sector and to promote the growth of the private. Has the public sector declined over the 1990s? The answer shown in Figure 5 for both countries is that the proportion of households headed by an individual with a public sector wage has declined. Has private wage employment grown? Again as a proportion of the total number of households private sector employment has fallen in Ghana and risen in Tanzania. These figures of course are not the number of jobs simply the proportions of households headed by either a public or private wage employee. The most important change in Ghana has been the growth of households headed by the urban self-employed. In fact this occupational type is the only one to expand, both farmers and wage employment generally has contracted (again as proportions not as absolute numbers).
In Figure 6 we show the decomposition of the average growth rate between that part due to the change in the proportion of households in each occupation and what we termed above the change in expenditure.[2] It will be seen from Figure 6 that the change in the proportion has a small negative effective on the average growth rate. In Tanzania this primarily reflects the fact that the contracting occupation was public sector wage employees who are in a relatively high income class. In Ghana while the public sector also contracted, so did farming which is the lowest income class. It is clear that both the change in proportions and the interaction effect only have a small role to play in the decomposition of the average growth rate. It is the change in expenditure, holding proportions constant, which is by far the most important component in this disaggregation of the average growth rate.
Figure 5
Figure 6
[2] It will be noted that the growth rate shown in Figure 6 differs from that in Figure 2. In Figure 2 we use weights which is not possible for the calculation shown in Figure 6.