Economic Development Poverty And Income Distribution

The increasing inequality and poverty that seem inevitably to accompany economic growth in developing countries have become more and more evident in recent years. The search for development paths that lead to growth with equality—all too difficult to find—is now an area of central concern for development economists. One result of their concern is this volume, in which internationally known representatives of a range of disciplines address themselves to ways in which growth with equity might be successfully achieved. The book begins with both empirical and theoretical background to the development issues involved, and with an overview of the experience of the international development assistance community. focuses on operational definitions of the poor that will permit analytical, policy-oriented research to lead to useful conclusions. Specific concern is expressed for small-business owners, women, peasants, and recent migrants from rural to urban areas. The basic question, of course, is what can be done about poverty and inequality. includes suggestions for specific measures and provides a comprehensive comparison across a wide range of policy options. The book does not solve the problem, but it does point to directions that promise a reasonably high probability of success. And throughout, suggestions are made for the kind of interdisciplinary research required to raise that probability even further.

This is a collection of papers examining the pressing issue of increasing inequality in the distribution of income in developing countries. While economic growth is a prerequisite for a sustained reduction in poverty, policies aimed at raising growth rates are often associated with a range of adverse short term effects, including rising unemployment, greater economic insecurity, environmental degradation and the weakening of traditional social safety nets. Pro-poor growth strategiesattempt to address these short term problems. But the ideal mix of policies, and their impact on the prospects for poverty reduction in the longer run, remain controversial topics. Growth, Inequality and Poverty comprises many of the most important contributions to the current debate.

This report provides evidence of a fairly generalised increase in income inequality over the past two decades across OECD countries, but the timing, intensity and causes of the increase differ from what is typically suggested in the media.

Is there a tradeoff between raising growth and reducing inequality and poverty? This paper reviews the theoretical and empirical literature on the complex links between growth, inequality, and poverty, with causation going in both directions. The evidence suggests that growth can be effective in reducing poverty, but its impact on inequality is ambiguous and depends on the underlying sources of growth. The impact of poverty and inequality on growth is likewise ambiguous, as several channels mediate the relationship. But most plausible mechanisms suggest that poverty and inequality reduce growth, at least in the long run. Policies play a role in shaping these relationships and those designed to improve equality of opportunity can simultaneously improve inclusiveness and growth.

The contributors argue that there need not be a trade-off between growth and equity in the long run. However, attempts by government to influence income distribution through large-scale tax and transfer programs can have a negative impact on growth. The contrast is vivid. While the majority of people in the industrial world and some in the developing world enjoy unprecedented affluence, a far greater number of people in the low-income countries live in abject poverty. Although several developing countries are achieving rapid economic growth and poverty reduction, most formerly centrally planned countries are struggling to implement market-oriented reforms in the midst of economic deterioration and rising poverty. The paramount importance of reducing poverty worldwide is forcing economists and policymakers to look at how income distribution and economic growth interact. The essays in this volume grew out of a 1995 conference sponsored by the International Monetary Fund. The contributors are scholars and policymakers from academic institutions, governments, and international organizations. The questions discussed include: How does income distribution interact with economic growth in the short run and the long run? To what extent can government use transfer programs to increase the incomes of the poor? How can government use social programs to help the poor increase their income-earning capacity? Does distributional inequality create an obstacle to long-term poverty reduction? Alternatively, is distributional inequality a necessary means of achieving economic growth? Generally, the contributors agree that there need not be a trade-off between growth and equity in the long run. However, attempts by government to influence income distribution through large-scale tax and transfer programs can have a negative impact on growth.