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Chapter 5:
Poverty, Inequality, and
Development
Rapporteur:
Ar Joi Corneja Proctan
This chapter takes up the question of growth
versus income distribution.
The chapter examines five questions:
1. What is the extent of relative inequality
and poverty in Least Develop Countries
(LDCs)?
2. What are the economic characteristics of
the poor?
3. Who benefits from economic growth?
4. Are economic growth and more equitable
income distributions compatible
objectives?
5. What policies will reduce absolute
poverty?
The concepts of size and functional income
distribution are defined as common
measures of income distribution.
The following topics are covered in this section:
1. 1. A review of Lorenz Curves and measures of
inequality
2. 2. A discussion of functional income distributions and
the role of labor supply and demand in determining
wages
S i z e
d i s t r i b u t i o n s
• P e r s o n a l o r s i z e
d i s t r i b u t i o n o f i n c o m e i s
t h e m e a s u r e m o s t c o m m o n l y
u s e d m y e c o n o m i s t .
• D e a l s w i t h i n d i v i d u a l
p e r s o n o r h o u s e h o l d s a n d
t h e t o t a l i n c o m e t h e y
r e c e i v e .
• A r r a n g e a l l i n d i v i d u a l s b y
a s c e n d i n g p e r s o n a l i n c o m e s
a n d t h e n d i v i d e t h e t o t a l
p o p u l a t i o n i n t o d i s t i n c t
g r o u p s o r s i z e s .
• T h e c o m m o n m e t h o d i s t o
Table-size distribution
T a b l e 1-T y p i c a l s i z e
d i s t r i b u t i o n o f p e r s o n a l
i n c o m e i n a d e v e l o p i n g
c o u n t r y b y i n c o m e s h a r e d -
Q u i n t i l e s a n d d e c i l e s
Lorenz Curve
• S h o w s t h e
a c t u a l
q u a n t i t a t i v
e
r e l a t i o n s h i
p b e t w e e n
t h e
p e r c e n t a g e
o f i n c o m e
r e c i p i e n t s
a n d t h e
p e r c e n t a g e
o f t h e t o t a l
i n c o m e .
• N o c o u n t r y
e x h i b i t s
e i t h e r
p e r f e c t
e q u a l i t y o r
p e r f e c t
i n e q u a l i t y
i n i t s
d i s t r i b u t i o
n o f i n c o m e .
• T h e g r e a t e r
t h e d e g r e e
o f
i n e q u a l i t y ,
Lorenz Curve
Lorenz
Curve
- A
r e l a t
i v e l y
e q u a l
d i s t r
i b u t i
o n o f
i n c o m
u n e q u a l
d i s t r i b u t i o n o f
i n c o m e
a n d A g g r e g a t e
m e a s u r e s o f
i n e q u a l i t y
• is a summary numerical measure of how unequally one
variable is related to another. The G i n i
c o e f f i c i e n t i s a n u m b e r
b e t w e e n 0 a n d 1, w h e r e
p e r f e c t e q u a l i t y h a s a G i n i
c o e f f i c i n t o f z e r o , a n d
a b s o l u t e i n e q u a l i t y y i e l d s
a G i n i c o e f f i c i n t o f 1.
m e a s u r e m e n t t h a t
s a t i s f y f o u r h i g h l y
d e s i r a b l e p r o p e r t i e s :
• A n o n y m i t y -
m e a s u r e o f
i n e q u a l i t y
s h o u l d n o t
d e p e n d o n
w h o h a s t h e
h i g h e r
i n c o m e
• S c a l e
i n d e p e n d e n
c e - m e a s u r e
o f
i n e q u a l i t y
s h o u l d n o t
• P o p u l a t i o n
i n d e p e n d e n c e -
m e a s u r e o f
i n e q u a l i t y
s h o u l d n o t b e
b a s e d o n t h e
n u m b e r
r e c i p i e n t s .
• T r a n s f e r
p r i n c i p l e
(P i g o u -D a l t o n
p r i n c i p l e )-
h o l d i n g a l l
i n c o m e s
c o n s t a n t , i f
w e t r a n s f e r
s o m e i n c o m e
F u n c t i o n a l
D i s t r i b u t i o n s
• F a c t o r s h a r e d i s t r i b u t i o n
o f i n c o m e
• A t t e m p t s t o e x p l a i n t h e
s h a r e o f t o t a l n a t i o n a l
i n c o m e t h a t e a c h o f t h e
f a c t o r s o f p r o d u c t i o n
(l a n d , l a b o r , a n d c a p i t a l )
r e c e i v e s .
• L a b o r r e c e i v e s a s a w h o l e
a n d c o m p a r e s t h i s w i t h t h e
p e r c e n t a g e s o f t o t a l
i n c o m e d i s t r i b u t e d i n t h e
f o r m o f r e n t , i n t e r e s t a n d
p r o f i t s .
M e a s u r i n g A b s o l u t e
P o v e r t y
A b s o l u t e
P o v e r t y
n u mb e r o f
p e o p l e w h o
a r e u n a b l e t o
c o mma n d
s u f f i c i e n t
r e s o u r c e s t o
s a t i s f y b a s i c
n e e d s
ma y b e
me a s u r e d b y
t h e n u mb e r o r
“h e a d c o u n t ”
H e a d c o u n t
I n d e x
s e t a t a l e v e l
t h a t r e ma i n s
c o n s t a n t i n
r e a l t e r ms s o
t h a t w e c a n
c h a r t
p r o g r e s s o n
a n a b s o l u t e
l e v e l o v e r
t i me .
Poverty line
• is set at a level that
remains constant in
real terms so that we
chart our progress on
an absolute level over
time.
d e t e r m i n i n g a l o c a l
a b s o l u t e p o v e r t y
l i n e
• d e f i n i n g a n
a d e q u a t e
b a s k e t o f
f o o d s b a s e d
o n t h e
n u t r i t i o n a l
r e q u i r e m e n t s
f r o m m e d i c a l
s t u d i e s o f
r e q u i r e d
c a l o r i e s ,
p r o t e i n a n d
m i c r o n u t r i e n
t s .
• T h e n , u s i n g
l o c a l
• T h e n a d d
t h e
e x p e n d i t
u r e s o f
t h i s
h o u s e h o l
d s u c h a s
c l o t h i n g
, s h e l t e r
a n d
m e d i c a l
t o
T o t a l
p o v e r t
y g a p
A v e r a g e i n c o m e
s h o r t f a l l
• a n o t h e r
i m p o r t a n t
p o v e r t y g a p
m e a s u r e m e n t
• t h e t o t a l
p o v e r t y g a p
d i v i d e d b y
t h e
h e a d c o u n t o f
t h e p o o r .
• I t t e l l s t h e
a v e r a g e
a m o u n t b y
m e a s u r
e s t h e
t o t a l
a m o u n t
o f
i n c o m e
n e c e s s
a r y t o
r a i s e
e v e r y o
T h e F o s t e r -G r e e r -
T h o r b e c k e (F G T ) I n d e x
• S a t i s f i e s a l l t h e f o u r
c r i t e r i a f o r a d e s i r a b l e
p o v e r t y m e a s u r e t h a t a r e
w i d e l y a c c e p t e d b y
d e v e l o p m e n t e c o n o m i s t .
T h e s e p r i n c i p l e s a r e :
• A n o n y m i t y
• P o p u l a t i o n i n d e p e n d e n c e
• M o n o t o n i c i t y - i f y o u a d d
i n c o m e t o s o m e o n e b e l o w
p o v e r t y l i n e , a l l o t h e r
i n c o m e s h e l d
c o n s t a n t , p o v e r t y c a n b e n o
g r e a t e r t h a n i t w a s
T h e H u m a n P o v e r t y
I n d e x (H P I )
• H u m a n p o v e r t y s h o u l d b e
m e a s u r e d i n t e r m s o f
t h r e e k e y d e p r i v a t i o n :
1. O f l i f e - f r a c t i o n o f
p e o p l e u n l i k e l y t o
l i v e b e y o n d 40 y e a r s
o f a g e
2. O f b a s i c e d u c a t i o n -
m e a s u r e d b y t h e
p e r c e n t a g e o f a d u l t s
w h o a r e i l l i t e r a t e
3. E c o n o m i c
T h e H u m a n P o v e r t y
I n d e x (H P I )
• A l o w H P I i s g o o d
• S m a l l e r p e r c e n t a g e o f t h e
p o p u l a t i o n i s d e p r i v e d
• A h i g h e r H P I i s
r e f l e c t i v e o f g r e a t e r
d e p r i v a t i o n
b e t w e e n
p o v e r t y , i n e q u a l i t y
a n d s o c i a l w e l f a r e
Wh a t ’s s o b a d a b o u t
h i g h i n e q u a l i t y ?
1. E x t r e m e i n c o m e
i n e q u a l i t y l e a d s t o
e c o n o m i c
i n e f f i c i e n c y
• T h e h i g h e r t h e
i n e q u a l i t y t h e
s m a l l e r t h e
f r a c t i o n o f t h e
Wh a t ’s s o b a d a b o u t
h i g h i n e q u a l i t y ?
2. E x t r e m e i n c o m e d i s p a r i t i e s
u n d e r m i n e s o c i a l s t a b i l i t y a n d
s o l i d a r i t y .
• H i g h i n c o m e i n e q u a l i t y
s t r e n g t h e n s t h e p o l i t i c a l
p o w e r o f t h e r i c h a n d a l s o
t h e i r e c o n o m i c b a r g a i n i n g
p o w e r .
• T h i s f a c i l i t a t e s r e n t s e e k i n g
i n c l u d i n g a c t i o n s s u c h a s
e x c e s s i v e l o b b y i n g , l a r g e
p o l i t i c a l d o n a t i o n s , b r i b e r y
a n d c r o n y i s m .
• M a k e s p o o r i n s t i t u t i o n s v e r y
d i f f i c u l t t o i m p r o v e b e c a u s e
t h o s e f e w w i t h m o n e y a n d p o w e r
T h r e e S t y l i z e d
T y p o l o g i e s :
• M o d e r n s e c t o r e n l a r g e m e n t -
t h e t w o s e c t o r e c o n o m y
d e v e l o p s b y e n l a r g i n g t h e
s i z e o f i t s m o d e r n s e c t o r
w h i l e m a i n t a i n i n g c o n s t a n t
w a g e s i n b o t h s e c t o r s .
• M o d e r n s e c t o r e n r i c h m e n t -
t h e e c o n o m y g r o w s b u t s u c h
g r o w t h i s l i m i t e d t o a f i x e d
n u m b e r o f p e o p l e i n t h e
m o d e r n s e c t o r s w i t h b o t h
t h e n u m b e r o f w o r k e r s a n d
t h e i r w a g e s h e l d c o n s t a n t
i n t h e t r a d i t i o n a l s e c t o r .
• T r a d i t i o n a l -s e c t o r
f o c u s e d t o w a r d
r e d u c i n g p o v e r t y
l e v e l s :
1. Wi d e s p r e a d
p o v e r t y
c r e a t e s
c o n d i t i o n s i n
w h i c h t h e p o o r
h a v e n o a c c e s s
t o c r e d i t
2. T h e r i c h i n m a n y
c o n t e m p o r a r y
p o o r c o u n t r i e s
a r e g e n e r a l l y
n o t n o t e d f o r
t h e i r f r u g a l i t y
f o r t h e i r d e s i r e
t o s a v e a n d
i n v e s t
3. L o w i n c o m e s a n d
4. R a i s i n g t h e
i n c o m e l e v e l s
o f t h e p o o r
w i l l s t i m u l a t e
a n o v e r a l l
i n c r e a s e i n
d e m a n d f o r
l o c a l l y
p r o d u c e d
n e c e s s i t y
p r o d u c t s .
5. A r e d u c t i o n o f
m a s s p o v e r t y
c a n s t i m u l a t e
h e a l t h y
e c o n o m i c
e x p a n s i o n b y
E c o n o m i c
C h a r a c t e r i s t i c s o f
P o v e r t y G r o u p s
1. R u r a l P o v e r t y
• P o o r a r e l o c a t e d i n
r u r a l a r e a s
•e n g a g e d i n
a g r i c u l t u r a l a n d
a s s o c i a t e d
a c t i v i t i e s
•w o m e n a n d c h i l d r e n
t h a n a d u l t m a l e s
•c o n c e n t r a t e d
2. Wo m e n a n d P o v e r t y
• Wo m e n m a k e u p a
s u b s t a n t i a l m a j o r i t y
o f t h e w o r l d ’s p o o r .
• Wo m e n a n d c h i l d r e n
e x p e r i e n c e t h e
h a r s h e s t d e p r i v a t i o n
• Wo m e n h a v e l e s s a c c e s s
t o e d u c a t i o n , f o r m a l
s e c t o r e m p l o y m e n t ,
s o c i a l s e c u r i t y , a n d
g o v e r n m e n t e m p l o y m e n t
p r o g r a m s .
• T h e l o w s t a t u s o f w o m e n
I n d i g e n o u s
P o p u l a t i o n s a n d
P o v e r t y
• F a c e s s e r i o u s
e c o n o m i c , p o l i t i c a l
a n d s o c i a l
d i s c r i m i n a t i o n
• D o m e s t i c c o n f l i c t s
a n d c i v i l w a r s
r e s u l t s i n l o s i n g
o u t i n t h e
c o m p e t i t i o n f o r
l i m i t e d r e s o u r c e s
O p t i o n s :
S o me B a s i c
C o n s i d e r a t i o n
s
A r e a s o f I n t e r v e n t i o n
F o u r b r o a d a r e a s o f
p o s s i b l e g o v e r n m e n t
p o l i c y i n t e r v e n t i o n
A l t e r i n g t h e
f u n c t i o n a l
d i s t r i b u t i o n -t h e
r e t u r n s t o l a b o r , l a n d
a n d c a p i t a l a s
d e t e r m i n e d b y f a c t o r
p r o c e s s , u t i l i z a t i o n
l e v e l s a n d t h e
c o n s e q u e n t s h a r e s o f
n a t i o n a l i n c o m e t h a t
a c c r u e t o t h e o w n e r s
o f e a c h f a c t o r .
M i t i g a t i n g t h e s i z e
d i s t r i b u t i o n
M o d e r a t i n g (r e d u c i n g )
t h e s i z e d i s t r i b u t i o n
D e v e l o p
i n g
c o u n t r i
e s t h a t
a i m t o
r e d u c e
p o v e r t y
a n d
e x c e s s i
v e
i n e q u a l
i t i e s i n
t h e i r
P o l i c y O p t i o n s
1. A l t e r i n g t h e
f u n c t i o n a l
d i s t r i b u t i o n o f
i n c o m e t h r o u g h
p o l i c i e s
d e s i g n e d t o
c h a n g e r e l a t i v e
f a c t o r p r i c e s
P o l i c y O p t i o n s
• M o d i f y i n g t h e s i z e
d i s t r i b u t i o n t h r o u g h
p r o g r e s s i v e
r e d i s t r i b u t i o n o f
a s s e t o w n e r s h i p
• R e d i s t r i b u t i o n o f a s s e t
o w n e r s h i p , s u c h a s l a n d
r e f o r m
• T r a n s f e r o f a c e r t a i n
p r o p o r t i o n o f a n n u a l
s a v i n g s a n d i n v e s t m e n t s
t o l o w i n c o m e g r o u p
• P r o m o t e w i d e r a c c e s s t o
P o l i c y O p t i o n s
• R e d u c i n g t h e s i z e
d i s t r i b u t i o n a t t h e
u p p e r l e v e l s t h r o u g h
p r o g r e s s i v e i n c o m e a n d
w e a l t h t a x e s
• P r o g r e s s i v e i n c o m e a n d
w e a l t h t a x e s t o r e d u c e
i n c o m e i n e q u a l i t y
• R i c h r e q u i r e d t o p a y a
p r o g r e s s i v e l y l a r g e r
p e r c e n t a g e o f t h e t o t a l
i n c o m e i n t a x e s t h a n p o o r
• I n m a n y d e v e l o p i n g
Policy Options
• Direct transfer payments and the public
provision of goods and services
• This refer to public health projects in rural
villages and urban fringe areas, school
lunches and preschool nutritional
supplementation programs and the provision
of clean water and electrification to remote
rural areas.
A l t h o u g h t h e t a s k o f
e n d i n g e x t r e m e
p o v e r t y w i l l b e
d i f f i c u l t , i t i s
p o s s i b l e , i f w e c a n
o n l y m u s t e r t h e w i l l .
A s n o t e d b y J a m e s
S p e t h , t h e e x e c u t i v e
d i r e c t o r o f t h e
U n i t e d N a t i o n s
D e v e l o p m e n t
P r o g r a m , “P o v e r t y i s
n o l o n g e r i n e v i t a b l e .
T h e w o r l d h a s t h e
T h a n k
Y o u !!!!!

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Chapter 5 final presentation

  • 1. Chapter 5: Poverty, Inequality, and Development Rapporteur: Ar Joi Corneja Proctan
  • 2. This chapter takes up the question of growth versus income distribution. The chapter examines five questions: 1. What is the extent of relative inequality and poverty in Least Develop Countries (LDCs)? 2. What are the economic characteristics of the poor? 3. Who benefits from economic growth? 4. Are economic growth and more equitable income distributions compatible objectives? 5. What policies will reduce absolute poverty?
  • 3. The concepts of size and functional income distribution are defined as common measures of income distribution. The following topics are covered in this section: 1. 1. A review of Lorenz Curves and measures of inequality 2. 2. A discussion of functional income distributions and the role of labor supply and demand in determining wages
  • 4. S i z e d i s t r i b u t i o n s • P e r s o n a l o r s i z e d i s t r i b u t i o n o f i n c o m e i s t h e m e a s u r e m o s t c o m m o n l y u s e d m y e c o n o m i s t . • D e a l s w i t h i n d i v i d u a l p e r s o n o r h o u s e h o l d s a n d t h e t o t a l i n c o m e t h e y r e c e i v e . • A r r a n g e a l l i n d i v i d u a l s b y a s c e n d i n g p e r s o n a l i n c o m e s a n d t h e n d i v i d e t h e t o t a l p o p u l a t i o n i n t o d i s t i n c t g r o u p s o r s i z e s . • T h e c o m m o n m e t h o d i s t o
  • 5. Table-size distribution T a b l e 1-T y p i c a l s i z e d i s t r i b u t i o n o f p e r s o n a l i n c o m e i n a d e v e l o p i n g c o u n t r y b y i n c o m e s h a r e d - Q u i n t i l e s a n d d e c i l e s
  • 6. Lorenz Curve • S h o w s t h e a c t u a l q u a n t i t a t i v e r e l a t i o n s h i p b e t w e e n t h e p e r c e n t a g e o f i n c o m e r e c i p i e n t s a n d t h e p e r c e n t a g e o f t h e t o t a l i n c o m e . • N o c o u n t r y e x h i b i t s e i t h e r p e r f e c t e q u a l i t y o r p e r f e c t i n e q u a l i t y i n i t s d i s t r i b u t i o n o f i n c o m e . • T h e g r e a t e r t h e d e g r e e o f i n e q u a l i t y ,
  • 8. Lorenz Curve - A r e l a t i v e l y e q u a l d i s t r i b u t i o n o f i n c o m
  • 9. u n e q u a l d i s t r i b u t i o n o f i n c o m e
  • 10. a n d A g g r e g a t e m e a s u r e s o f i n e q u a l i t y • is a summary numerical measure of how unequally one variable is related to another. The G i n i c o e f f i c i e n t i s a n u m b e r b e t w e e n 0 a n d 1, w h e r e p e r f e c t e q u a l i t y h a s a G i n i c o e f f i c i n t o f z e r o , a n d a b s o l u t e i n e q u a l i t y y i e l d s a G i n i c o e f f i c i n t o f 1.
  • 11. m e a s u r e m e n t t h a t s a t i s f y f o u r h i g h l y d e s i r a b l e p r o p e r t i e s : • A n o n y m i t y - m e a s u r e o f i n e q u a l i t y s h o u l d n o t d e p e n d o n w h o h a s t h e h i g h e r i n c o m e • S c a l e i n d e p e n d e n c e - m e a s u r e o f i n e q u a l i t y s h o u l d n o t • P o p u l a t i o n i n d e p e n d e n c e - m e a s u r e o f i n e q u a l i t y s h o u l d n o t b e b a s e d o n t h e n u m b e r r e c i p i e n t s . • T r a n s f e r p r i n c i p l e (P i g o u -D a l t o n p r i n c i p l e )- h o l d i n g a l l i n c o m e s c o n s t a n t , i f w e t r a n s f e r s o m e i n c o m e
  • 12. F u n c t i o n a l D i s t r i b u t i o n s • F a c t o r s h a r e d i s t r i b u t i o n o f i n c o m e • A t t e m p t s t o e x p l a i n t h e s h a r e o f t o t a l n a t i o n a l i n c o m e t h a t e a c h o f t h e f a c t o r s o f p r o d u c t i o n (l a n d , l a b o r , a n d c a p i t a l ) r e c e i v e s . • L a b o r r e c e i v e s a s a w h o l e a n d c o m p a r e s t h i s w i t h t h e p e r c e n t a g e s o f t o t a l i n c o m e d i s t r i b u t e d i n t h e f o r m o f r e n t , i n t e r e s t a n d p r o f i t s .
  • 13. M e a s u r i n g A b s o l u t e P o v e r t y A b s o l u t e P o v e r t y n u mb e r o f p e o p l e w h o a r e u n a b l e t o c o mma n d s u f f i c i e n t r e s o u r c e s t o s a t i s f y b a s i c n e e d s ma y b e me a s u r e d b y t h e n u mb e r o r “h e a d c o u n t ” H e a d c o u n t I n d e x s e t a t a l e v e l t h a t r e ma i n s c o n s t a n t i n r e a l t e r ms s o t h a t w e c a n c h a r t p r o g r e s s o n a n a b s o l u t e l e v e l o v e r t i me .
  • 14. Poverty line • is set at a level that remains constant in real terms so that we chart our progress on an absolute level over time.
  • 15. d e t e r m i n i n g a l o c a l a b s o l u t e p o v e r t y l i n e • d e f i n i n g a n a d e q u a t e b a s k e t o f f o o d s b a s e d o n t h e n u t r i t i o n a l r e q u i r e m e n t s f r o m m e d i c a l s t u d i e s o f r e q u i r e d c a l o r i e s , p r o t e i n a n d m i c r o n u t r i e n t s . • T h e n , u s i n g l o c a l • T h e n a d d t h e e x p e n d i t u r e s o f t h i s h o u s e h o l d s u c h a s c l o t h i n g , s h e l t e r a n d m e d i c a l t o
  • 16. T o t a l p o v e r t y g a p A v e r a g e i n c o m e s h o r t f a l l • a n o t h e r i m p o r t a n t p o v e r t y g a p m e a s u r e m e n t • t h e t o t a l p o v e r t y g a p d i v i d e d b y t h e h e a d c o u n t o f t h e p o o r . • I t t e l l s t h e a v e r a g e a m o u n t b y m e a s u r e s t h e t o t a l a m o u n t o f i n c o m e n e c e s s a r y t o r a i s e e v e r y o
  • 17. T h e F o s t e r -G r e e r - T h o r b e c k e (F G T ) I n d e x • S a t i s f i e s a l l t h e f o u r c r i t e r i a f o r a d e s i r a b l e p o v e r t y m e a s u r e t h a t a r e w i d e l y a c c e p t e d b y d e v e l o p m e n t e c o n o m i s t . T h e s e p r i n c i p l e s a r e : • A n o n y m i t y • P o p u l a t i o n i n d e p e n d e n c e • M o n o t o n i c i t y - i f y o u a d d i n c o m e t o s o m e o n e b e l o w p o v e r t y l i n e , a l l o t h e r i n c o m e s h e l d c o n s t a n t , p o v e r t y c a n b e n o g r e a t e r t h a n i t w a s
  • 18. T h e H u m a n P o v e r t y I n d e x (H P I ) • H u m a n p o v e r t y s h o u l d b e m e a s u r e d i n t e r m s o f t h r e e k e y d e p r i v a t i o n : 1. O f l i f e - f r a c t i o n o f p e o p l e u n l i k e l y t o l i v e b e y o n d 40 y e a r s o f a g e 2. O f b a s i c e d u c a t i o n - m e a s u r e d b y t h e p e r c e n t a g e o f a d u l t s w h o a r e i l l i t e r a t e 3. E c o n o m i c
  • 19. T h e H u m a n P o v e r t y I n d e x (H P I ) • A l o w H P I i s g o o d • S m a l l e r p e r c e n t a g e o f t h e p o p u l a t i o n i s d e p r i v e d • A h i g h e r H P I i s r e f l e c t i v e o f g r e a t e r d e p r i v a t i o n
  • 20. b e t w e e n p o v e r t y , i n e q u a l i t y a n d s o c i a l w e l f a r e Wh a t ’s s o b a d a b o u t h i g h i n e q u a l i t y ? 1. E x t r e m e i n c o m e i n e q u a l i t y l e a d s t o e c o n o m i c i n e f f i c i e n c y • T h e h i g h e r t h e i n e q u a l i t y t h e s m a l l e r t h e f r a c t i o n o f t h e
  • 21. Wh a t ’s s o b a d a b o u t h i g h i n e q u a l i t y ? 2. E x t r e m e i n c o m e d i s p a r i t i e s u n d e r m i n e s o c i a l s t a b i l i t y a n d s o l i d a r i t y . • H i g h i n c o m e i n e q u a l i t y s t r e n g t h e n s t h e p o l i t i c a l p o w e r o f t h e r i c h a n d a l s o t h e i r e c o n o m i c b a r g a i n i n g p o w e r . • T h i s f a c i l i t a t e s r e n t s e e k i n g i n c l u d i n g a c t i o n s s u c h a s e x c e s s i v e l o b b y i n g , l a r g e p o l i t i c a l d o n a t i o n s , b r i b e r y a n d c r o n y i s m . • M a k e s p o o r i n s t i t u t i o n s v e r y d i f f i c u l t t o i m p r o v e b e c a u s e t h o s e f e w w i t h m o n e y a n d p o w e r
  • 22. T h r e e S t y l i z e d T y p o l o g i e s : • M o d e r n s e c t o r e n l a r g e m e n t - t h e t w o s e c t o r e c o n o m y d e v e l o p s b y e n l a r g i n g t h e s i z e o f i t s m o d e r n s e c t o r w h i l e m a i n t a i n i n g c o n s t a n t w a g e s i n b o t h s e c t o r s . • M o d e r n s e c t o r e n r i c h m e n t - t h e e c o n o m y g r o w s b u t s u c h g r o w t h i s l i m i t e d t o a f i x e d n u m b e r o f p e o p l e i n t h e m o d e r n s e c t o r s w i t h b o t h t h e n u m b e r o f w o r k e r s a n d t h e i r w a g e s h e l d c o n s t a n t i n t h e t r a d i t i o n a l s e c t o r . • T r a d i t i o n a l -s e c t o r
  • 23. f o c u s e d t o w a r d r e d u c i n g p o v e r t y l e v e l s : 1. Wi d e s p r e a d p o v e r t y c r e a t e s c o n d i t i o n s i n w h i c h t h e p o o r h a v e n o a c c e s s t o c r e d i t 2. T h e r i c h i n m a n y c o n t e m p o r a r y p o o r c o u n t r i e s a r e g e n e r a l l y n o t n o t e d f o r t h e i r f r u g a l i t y f o r t h e i r d e s i r e t o s a v e a n d i n v e s t 3. L o w i n c o m e s a n d 4. R a i s i n g t h e i n c o m e l e v e l s o f t h e p o o r w i l l s t i m u l a t e a n o v e r a l l i n c r e a s e i n d e m a n d f o r l o c a l l y p r o d u c e d n e c e s s i t y p r o d u c t s . 5. A r e d u c t i o n o f m a s s p o v e r t y c a n s t i m u l a t e h e a l t h y e c o n o m i c e x p a n s i o n b y
  • 24. E c o n o m i c C h a r a c t e r i s t i c s o f P o v e r t y G r o u p s 1. R u r a l P o v e r t y • P o o r a r e l o c a t e d i n r u r a l a r e a s •e n g a g e d i n a g r i c u l t u r a l a n d a s s o c i a t e d a c t i v i t i e s •w o m e n a n d c h i l d r e n t h a n a d u l t m a l e s •c o n c e n t r a t e d
  • 25. 2. Wo m e n a n d P o v e r t y • Wo m e n m a k e u p a s u b s t a n t i a l m a j o r i t y o f t h e w o r l d ’s p o o r . • Wo m e n a n d c h i l d r e n e x p e r i e n c e t h e h a r s h e s t d e p r i v a t i o n • Wo m e n h a v e l e s s a c c e s s t o e d u c a t i o n , f o r m a l s e c t o r e m p l o y m e n t , s o c i a l s e c u r i t y , a n d g o v e r n m e n t e m p l o y m e n t p r o g r a m s . • T h e l o w s t a t u s o f w o m e n
  • 26. I n d i g e n o u s P o p u l a t i o n s a n d P o v e r t y • F a c e s s e r i o u s e c o n o m i c , p o l i t i c a l a n d s o c i a l d i s c r i m i n a t i o n • D o m e s t i c c o n f l i c t s a n d c i v i l w a r s r e s u l t s i n l o s i n g o u t i n t h e c o m p e t i t i o n f o r l i m i t e d r e s o u r c e s
  • 27. O p t i o n s : S o me B a s i c C o n s i d e r a t i o n s A r e a s o f I n t e r v e n t i o n F o u r b r o a d a r e a s o f p o s s i b l e g o v e r n m e n t p o l i c y i n t e r v e n t i o n A l t e r i n g t h e f u n c t i o n a l d i s t r i b u t i o n -t h e r e t u r n s t o l a b o r , l a n d a n d c a p i t a l a s d e t e r m i n e d b y f a c t o r p r o c e s s , u t i l i z a t i o n l e v e l s a n d t h e c o n s e q u e n t s h a r e s o f n a t i o n a l i n c o m e t h a t a c c r u e t o t h e o w n e r s o f e a c h f a c t o r . M i t i g a t i n g t h e s i z e d i s t r i b u t i o n M o d e r a t i n g (r e d u c i n g ) t h e s i z e d i s t r i b u t i o n D e v e l o p i n g c o u n t r i e s t h a t a i m t o r e d u c e p o v e r t y a n d e x c e s s i v e i n e q u a l i t i e s i n t h e i r
  • 28. P o l i c y O p t i o n s 1. A l t e r i n g t h e f u n c t i o n a l d i s t r i b u t i o n o f i n c o m e t h r o u g h p o l i c i e s d e s i g n e d t o c h a n g e r e l a t i v e f a c t o r p r i c e s
  • 29. P o l i c y O p t i o n s • M o d i f y i n g t h e s i z e d i s t r i b u t i o n t h r o u g h p r o g r e s s i v e r e d i s t r i b u t i o n o f a s s e t o w n e r s h i p • R e d i s t r i b u t i o n o f a s s e t o w n e r s h i p , s u c h a s l a n d r e f o r m • T r a n s f e r o f a c e r t a i n p r o p o r t i o n o f a n n u a l s a v i n g s a n d i n v e s t m e n t s t o l o w i n c o m e g r o u p • P r o m o t e w i d e r a c c e s s t o
  • 30. P o l i c y O p t i o n s • R e d u c i n g t h e s i z e d i s t r i b u t i o n a t t h e u p p e r l e v e l s t h r o u g h p r o g r e s s i v e i n c o m e a n d w e a l t h t a x e s • P r o g r e s s i v e i n c o m e a n d w e a l t h t a x e s t o r e d u c e i n c o m e i n e q u a l i t y • R i c h r e q u i r e d t o p a y a p r o g r e s s i v e l y l a r g e r p e r c e n t a g e o f t h e t o t a l i n c o m e i n t a x e s t h a n p o o r • I n m a n y d e v e l o p i n g
  • 31. Policy Options • Direct transfer payments and the public provision of goods and services • This refer to public health projects in rural villages and urban fringe areas, school lunches and preschool nutritional supplementation programs and the provision of clean water and electrification to remote rural areas.
  • 32. A l t h o u g h t h e t a s k o f e n d i n g e x t r e m e p o v e r t y w i l l b e d i f f i c u l t , i t i s p o s s i b l e , i f w e c a n o n l y m u s t e r t h e w i l l . A s n o t e d b y J a m e s S p e t h , t h e e x e c u t i v e d i r e c t o r o f t h e U n i t e d N a t i o n s D e v e l o p m e n t P r o g r a m , “P o v e r t y i s n o l o n g e r i n e v i t a b l e . T h e w o r l d h a s t h e
  • 33. T h a n k Y o u !!!!!