Copyright © 2006 Pearson Addison-Wesley. All rights reserved. Chapter 5 Poverty, Inequality, and Development
Copyright © 2006 Pearson Addison-Wesley. All rights reserved. 5-2 The Growth Controversy: Seven Critical Questions n What is the extent of relative inequality, and how is this related to the extent of poverty? n Who are the poor? n Who benefits from economic growth? n Does rapid growth necessarily cause greater income inequality? n Do the poor benefit from growth?
Copyright © 2006 Pearson Addison-Wesley. All rights reserved. 5-3 The Growth Controversy: Seven Critical Questions n Are high levels of inequality always bad? n What policies can reduce poverty?
Copyright © 2006 Pearson Addison-Wesley. All rights reserved. 5-4 Measuring Inequality and Poverty n Measuring Inequality –Size distributions
Copyright © 2006 Pearson Addison-Wesley. All rights reserved. 5-5 Table 5.1
Copyright © 2006 Pearson Addison-Wesley. All rights reserved. 5-6 Measuring Inequality and Poverty n Measuring Inequality –size distributions –Lorenz curves
Copyright © 2006 Pearson Addison-Wesley. All rights reserved. 5-7 Figure 5.1
Copyright © 2006 Pearson Addison-Wesley. All rights reserved. 5-8 Figure 5.2
Copyright © 2006 Pearson Addison-Wesley. All rights reserved. 5-9 Measuring Inequality and Poverty n 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)
Copyright © 2006 Pearson Addison-Wesley. All rights reserved Figure 5.3
Copyright © 2006 Pearson Addison-Wesley. All rights reserved Figure 5.4
Copyright © 2006 Pearson Addison-Wesley. All rights reserved Measuring Inequality and Poverty n Measuring Inequality –Size distributions –Lorenz curves –Gini coefficients and aggregate measures of inequality –Functional distributions (see Figure 5.5)
Copyright © 2006 Pearson Addison-Wesley. All rights reserved Figure 5.5
Copyright © 2006 Pearson Addison-Wesley. All rights reserved Measuring Inequality and Poverty n Measuring Absolute Poverty –Headcount Index –Total poverty gap –WhereY p is the absolute poverty line –Y i is income of person i
Copyright © 2006 Pearson Addison-Wesley. All rights reserved Measuring Inequality and Poverty n Measuring Absolute Poverty –Average poverty gap –WhereH is number of persons –TPG is total poverty gap
Copyright © 2006 Pearson Addison-Wesley. All rights reserved Figure 5.6
Copyright © 2006 Pearson Addison-Wesley. All rights reserved Measuring Inequality and Poverty n Measuring Absolute Poverty –Foster-Greer-Thorbecke measure
Copyright © 2006 Pearson Addison-Wesley. All rights reserved Measuring Inequality and Poverty: n Measuring Absolute Poverty –Total poverty gap –Average poverty gap –Foster-Greer-Thorbecke measure –The Human Poverty Index
Copyright © 2006 Pearson Addison-Wesley. All rights reserved Poverty, Inequality, and Social Welfare n What’s so bad about inequality? n 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)
Copyright © 2006 Pearson Addison-Wesley. All rights reserved Figure 5.7
Copyright © 2006 Pearson Addison-Wesley. All rights reserved Figure 5.8
Copyright © 2006 Pearson Addison-Wesley. All rights reserved Figure 5.9
Copyright © 2006 Pearson Addison-Wesley. All rights reserved Poverty, Inequality, and Social Welfare n What’s so bad about inequality? n Dualistic development and shifting Lorenz curves: some stylized typologies –Modern sector enlargement –Modern sector enrichment –Traditional sector enrichment n Kuznets’s inverted-U hypothesis (see Figure 5.10 and Tables 5.2 and 5.3)
Copyright © 2006 Pearson Addison-Wesley. All rights reserved Figure 5.10
Copyright © 2006 Pearson Addison-Wesley. All rights reserved Table 5.2
Copyright © 2006 Pearson Addison-Wesley. All rights reserved Table 5.3
Copyright © 2006 Pearson Addison-Wesley. All rights reserved Figure 5.11
Copyright © 2006 Pearson Addison-Wesley. All rights reserved Figure 5.12
Copyright © 2006 Pearson Addison-Wesley. All rights reserved Poverty, Inequality, and Social Welfare n What’s so bad about inequality? n Dualistic development and shifting Lorenz curves: some stylized typologies –Modern sector enlargement –Modern sector enrichment –traditional sector enrichment n Kuznets’s inverted-U hypothesis n Growth and inequality (see Figure 5.13)
Copyright © 2006 Pearson Addison-Wesley. All rights reserved Figure 5.13
Copyright © 2006 Pearson Addison-Wesley. All rights reserved Absolute Poverty: Extent and Magnitude n Poverty: some progress
Copyright © 2006 Pearson Addison-Wesley. All rights reserved Figure 5.14
Copyright © 2006 Pearson Addison-Wesley. All rights reserved Figure 5.15
Copyright © 2006 Pearson Addison-Wesley. All rights reserved Figure 5.16
Copyright © 2006 Pearson Addison-Wesley. All rights reserved Table 5.4
Copyright © 2006 Pearson Addison-Wesley. All rights reserved Table 5.4 (cont’d)
Copyright © 2006 Pearson Addison-Wesley. All rights reserved Table 5.4 (cont’d)
Copyright © 2006 Pearson Addison-Wesley. All rights reserved Absolute Poverty: Extent and Magnitude n Poverty: some progress n Growth and poverty (see Figures 5.17a and 5.17b)
Copyright © 2006 Pearson Addison-Wesley. All rights reserved Figure 5.17 (a)
Copyright © 2006 Pearson Addison-Wesley. All rights reserved Figure 5.17 (b)
Copyright © 2006 Pearson Addison-Wesley. All rights reserved Economic Characteristics of Poverty Groups n Rural Poverty (see Table 5.5)
Copyright © 2006 Pearson Addison-Wesley. All rights reserved Table 5.5
Copyright © 2006 Pearson Addison-Wesley. All rights reserved Economic Characteristics of Poverty Groups n Rural poverty n Women and poverty n Ethnic minorities, indigenous populations, and poverty
Copyright © 2006 Pearson Addison-Wesley. All rights reserved Table 5.6
Copyright © 2006 Pearson Addison-Wesley. All rights reserved The Range of Policy Options: Some Basic Considerations n Areas of intervention n Policy options –Changing relative factor prices –Progressive redistribution of asset ownership –Progressive taxation –Transfer payments and public provision of goods and services
Copyright © 2006 Pearson Addison-Wesley. All rights reserved Figure 5.18
Copyright © 2006 Pearson Addison-Wesley. All rights reserved The Range of Policy Options: Some Basic Considerations n Areas of intervention n Policy options n the need for a ‘package’ of policies
Copyright © 2006 Pearson Addison-Wesley. All rights reserved Concepts for Review n Absolute poverty n Asset ownership n Character of economic growth n Deciles n Disposable income n Elasticity of factor substitution n Factor-price distortions n Factor share distribution of income n Factors of production n Foster-Greer- Thorbecke (FGT) index n Functional distribution of income
Copyright © 2006 Pearson Addison-Wesley. All rights reserved Concepts for Review (cont’d) n Gini coefficient n Headcount index n Human Poverty Index n Income inequality n Indirect taxes n Kuznets curve n Land reform n Lorenz curve n Neoclassical price- incentive model n Personal distribution of income n Poverty gap n Progressive income tax
Copyright © 2006 Pearson Addison-Wesley. All rights reserved Concepts for Review (cont’d) n Public consumption n Quintiles n Redistribution policies n Regressive tax n Size distribution of income n Subsidy n Workfare programs
Copyright © 2006 Pearson Addison-Wesley. All rights reserved Figure A5.1
Copyright © 2006 Pearson Addison-Wesley. All rights reserved Table A5.2