The Patterns and Determinants of Household Welfare Growth in Jordan : 2002-2010

Jordan's economic growth in the past decade has translated into a significant rise in household consumption and a decline in poverty and inequality indicators. Yet, the sentiment of the overall population seems to point to worsening disparities. Using official household expenditure surveys for 2002, 2008, and 2010, this paper analyzes the patterns and determinants of household welfare growth and examines the extent to which economic growth has been inclusive of the more vulnerable groups. Using counterfactual decompositions, the paper dwells first on the dynamics observed behind the drop in poverty and inequality. It then carries out regression analysis using re-centered influence functions to examine the economic determinants of household welfare growth throughout the decade. The paper finds that welfare growth as opposed to welfare distribution was the main driver behind poverty reduction, and that the drop in inequality was primarily driven by a regional catching-up effect. In addition, the analysis identifies rent, access to human capital services, and more importantly employment in the services sector and the public sector as the major determinants of welfare growth in Jordan. Public hiring in particular was used extensively as a tool for poverty alleviation, especially for residents outside the capital.