Basic Needs and Growth-Welfare Trade-Offs

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Abstract
Can nations achieve both growth and equity or must one value be sacrificed to attain the other? The controversy over trade-offs between aggregate economic performance and social welfare lies at the heart of recent debates on development policy. This study reviews these debates, identifies the specific forms of likely trade-offs, and examines the evidence over a twenty-five-year period for a sample of 104 nations. We employ a cross-national panel design to ask two questions: (1) Does basic needs achievement compromise future growth? (2) Does rapid growth undermine future needs achievement? We find no evidence for the orthodox view that basic needs fulfillment or improvement compromise growth. To the contrary, we find that basic needs attainment facilitates long-term economic growth. The evidence is somewhat less clear regarding the second question, although it appears that rapid growth does not produce substantial basic needs improvements.

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