Chapter 5 File

Report
Chapter 5
Poverty, Inequality,
and Development
Copyright © 2006 Pearson Addison-Wesley. All rights reserved.
The Growth Controversy: Seven
Critical Questions





What is the extent of relative inequality, and
how is this related to the extent of poverty?
Who are the poor?
Who benefits from economic growth?
Does rapid growth necessarily cause
greater income inequality?
Do the poor benefit from growth?
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5-2
The Growth Controversy: Seven
Critical Questions


Are high levels of inequality always bad?
What policies can reduce poverty?
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5-3
Measuring Inequality and Poverty

Measuring Inequality
– Size distributions
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5-4
Table 5.1
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5-5
Measuring Inequality and Poverty

Measuring Inequality
– size distributions
– Lorenz curves
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5-6
Figure 5.1
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Figure 5.2
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Measuring Inequality and Poverty

Measuring Inequality
– Size distributions (see Table 5.1)
– Lorenz curves (see Figures 5.1 and 5.2)
– Gini coefficients and aggregate measures of
inequality (see Figures 5.3 and 5.4)
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Figure 5.3
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Figure 5.4
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5-11
Measuring Inequality and Poverty

Measuring Inequality
– Size distributions
– Lorenz curves
– Gini coefficients and aggregate measures of
inequality
– Functional distributions (see Figure 5.5)
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5-12
Figure 5.5
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5-13
Measuring Inequality and Poverty

Measuring Absolute Poverty
– Headcount Index
– Total poverty gap
TPG  i 1 (Yp  Yi )
H
– Where Yp is the absolute poverty line
– Yi is income of person i
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5-14
Measuring Inequality and Poverty

Measuring Absolute Poverty
– Average poverty gap
TPG
APG 
H
– Where H is number of persons
– TPG is total poverty gap
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5-15
Figure 5.6
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5-16
Measuring Inequality and Poverty

Measuring Absolute Poverty
– Foster-Greer-Thorbecke measure
H
1
P 
n
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
(
Y

Y
)
 p i
i 1
Yp
5-17
Measuring Inequality and Poverty:

Measuring Absolute Poverty
– Total poverty gap
– Average poverty gap
– Foster-Greer-Thorbecke measure
– The Human Poverty Index
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5-18
Poverty, Inequality, and Social
Welfare


What’s so bad about inequality?
Dualistic development and shifting Lorenz
curves: some stylized typologies
– Traditional sector enrichment (see Figure 5.7)
– Modern sector enrichment (see Figure 5.8)
– Modern sector enlargement (see Figure 5.9)
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Figure 5.7
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Figure 5.8
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Figure 5.9
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5-22
Poverty, Inequality, and Social
Welfare


What’s so bad about inequality?
Dualistic development and shifting Lorenz
curves: some stylized typologies
– Modern sector enlargement
– Modern sector enrichment
– Traditional sector enrichment

Kuznets’s inverted-U hypothesis (see Figure
5.10 and Tables 5.2 and 5.3)
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5-23
Figure 5.10
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5-24
Table 5.2
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5-25
Table 5.3
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5-26
Figure 5.11
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Figure 5.12
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5-28
Poverty, Inequality, and Social
Welfare


What’s so bad about inequality?
Dualistic development and shifting Lorenz
curves: some stylized typologies
– Modern sector enlargement
– Modern sector enrichment
– traditional sector enrichment


Kuznets’s inverted-U hypothesis
Growth and inequality (see Figure 5.13)
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5-29
Figure 5.13
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5-30
Absolute Poverty: Extent and
Magnitude

Poverty: some progress
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Figure 5.14
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Figure 5.15
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Figure 5.16
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Table 5.4
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Table 5.4 (cont’d)
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Table 5.4 (cont’d)
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5-37
Absolute Poverty: Extent and
Magnitude


Poverty: some progress
Growth and poverty (see Figures 5.17a and
5.17b)
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Figure 5.17 (a)
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Figure 5.17 (b)
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Economic Characteristics of
Poverty Groups

Rural Poverty (see Table 5.5)
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Table 5.5
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Economic Characteristics of
Poverty Groups



Rural poverty
Women and poverty
Ethnic minorities, indigenous populations,
and poverty
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Table 5.6
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The Range of Policy Options:
Some Basic Considerations


Areas of intervention
Policy options
– Changing relative factor prices
– Progressive redistribution of asset ownership
– Progressive taxation
– Transfer payments and public provision of
goods and services
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Figure 5.18
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The Range of Policy Options:
Some Basic Considerations



Areas of intervention
Policy options
the need for a ‘package’ of policies
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Concepts for Review





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Absolute poverty
Asset ownership
Character of economic
growth
Deciles
Disposable income
Elasticity of factor
substitution
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



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Factor-price distortions
Factor share
distribution of income
Factors of production
Foster-GreerThorbecke (FGT)
index
Functional distribution
of income
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Concepts for Review (cont’d)
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Gini coefficient
Headcount index
Human Poverty Index
Income inequality
Indirect taxes
Kuznets curve
Land reform
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




Lorenz curve
Neoclassical priceincentive model
Personal distribution of
income
Poverty gap
Progressive income
tax
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Concepts for Review (cont’d)




Public consumption
Quintiles
Redistribution policies
Regressive tax
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


Size distribution of
income
Subsidy
Workfare programs
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Figure A5.1
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5-51
Table A5.2
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