Download Poverty, Inequality and Development

Poverty, Inequality and
Development
Chapter 5(a), 9(b)
Poverty
• Poverty is a critical problem faced by the global
community.
• Today, 1.6 billion people are living in “extreme
poverty”.
• More than 4 billion people (2/3 of humanity)
live on under $2 a day.
• Asia and Africa have higher incidence of poverty.
Approximately 662 million poor people reside in
India and China alone.
Poverty
• Asia is home to approximately 1 billion poor
people.
• Despite impressive growth rates, distribution of
income has remained unequal and in many
cases, inequalities are increasing.
Poverty
• How do we measure poverty?
Absolute poverty is measured by
▫ Head Count Ratio = H/N
 H= no. of people whose income falls below absolute
poverty line. (Yp) – usually $1 a day.
 N= total popultion
Poverty
• How do we measure poverty?
▫ Total Poverty Gap, which refers to the total
amount of income necessary to raise all those who
are below the poverty up to that line.
H
TPG= Σ (Yp – Yi)
i=1
(Refer to Tables – 5.13, 5.4, 5.5)
▫ UNDP – Human Poverty Index based on key
deprivations of life, education and economic
provisioning.
Poverty
• How do we measure inequality?
▫ Lorenz Curve
▫ Size Distribution of Income (Table 5.2 Todaro)
▫ Gini Coefficient
• Profile of Poor
▫ Rural
▫ Women, Children
▫ Ethnic Minorities
Poverty
Gini Coefficient
• Kuznets Inverted – U Hypothesis
GDP PC
Poverty
• How does income distribution change over time?
What is the relation between level of development
and inequality?
• Simon Kuznets developed a two-sector model and
explained the inverted-U shape of the curve.
• At low levels of income, as labor moves from
agriculture to industry, inequalities rise in the
beginning.
• However, in the labor stage, as the modern sector
expands and the service sector grows, inequalities
fall.
Poverty
• Explanation in terms of Lewis Model or
Structural transformation.
• Research studies do not provide conclusive
evidence. (My research showed both inverted-U
shape and “Latin American Effect”.)
Policies for Poverty Alleviation
and Challenges
• Does the rising tide lift the boat? Does economic
growth reduce poverty? – A debatable issue.
• According to the World Bank, economic growth
does not necessarily reduce poverty. In many
countries, inequalities have increased.
Policies for Poverty Alleviation
and Challenges
• Pro-poor Economic Policies




Labor – intensive industrialization (Asian Countries)
Land reforms, distribution of assets
Development of agriculture
A.K. Sen’s “capabilities”
 In-Kind distribution of goods – “direct – transfer”
 Investment in education health (Human Capital)
 List two other policies
• Role of Microfinance