CH10- POVERTY AND INCOME DISTRIBUTION
development, alongside w/ the importance of economic and
INTRODUCTION
2005- 25% or about 1.4 B people around the world lived in poverty
Asia- host to a majority of world’s poor: (China- 207M India- 455M)
-home to more than 911 M whop struggle to meet basic food,
clothing and housing need or 66% of wold’s poor
Sustained growth in income = gap bet rich and poor has grown
per capita income
In 1960, (8 times greater)
Richest 20 economies ----------->------------poorest 20 countries
After 35 yrs of record growth In total world income, this income
differential has more than doubled.
Similar trends: fruits of economic gains over the years have accrued
ONLY to a select few.
THE VARIOUS CIRCLE OF POVERTY AND INEQUALITY
Core of all development policies (AM):
-alleviation of poverty
-minimization of economic inequality
Impact of differences is more marked in developing countries where
gov’t faces greater constraints in its ability to provide much needed
assistance to improve the lot of their poor citizens
Sacrifice required to send a child to school is substantial even tuition
charges are low. Cost of clothing transpo, books are quite high relative
to income levels of poor.
Children raised in poverty- NO peer groups or role model to instill in
them virtues of educ and human capital acquisition.
Drugs and crime (perhaps sport)- only ways out of this low-level trap.
Perpetuation of poverty to successive generations, gap bet rich and
poor will be perpetuated and get worse - if chain will not be broken
Is Climate a factor? - Climate theory of development
Temperate climate - provides more conducive environment for econ
growth
Almost all successful and modern industrial econ- situated in
temperate zone and colder places of the world
Heat causes more rapid rate of soil deterioration and rapid
deterioration of other natural resources.
Warmer countries- heath of workforce is more adversely affected due
to greater frequency of air- and water-borne infections and DISEASES
SPREAD MORE RAPIDLY. Also, working is more taxing on physical body,
hence, labor productivity is lower.
Geographical tropics countries- nearly all poor
Mid and higher latitudes- high income countries
Climate and geography- continues to matter greatly for econ
political institutions.
STRONG RECOMMENDATION: reintroduction of geographical
considerations into the econometric and theoretical studies of
cross-country econ growth
MEASURING POVERTY AND INEQUALITY
Poverty- broader sense, inability to access for minimal or
acceptable standard of living. But this loose definition contains
subjective notions- fact that what one needs or finds “acceptable”
or “minimal” is a very relative matter.
Poverty standards and definitions thus vary across different
countries.
Economic inequality- uneven distribution of income or
expenditure
Income gaps- inevitable consequences of growth and
development , and will correct itself in due course.
Gov’t intervention- used to avoid or at least minimize the
observed income gaps
Measurement of Poverty
Development economics- poverty as inability to access resources
to enjoy a minimal or acceptable standard of living.
However, minimum needs or acceptable standards of living vary
form county to country, indiv to indiv, in accordance with CESC
(cultural, economic, social norms, expectation)
HENCE, THIS DEFINITION IS NOT VERY USEFUL WHEN MEASURING
POVERTY AMD EVEN LESS SO WHEN MAKING CROSS_COUNTRY
COMPARISONS.
Poverty- at subsistence level, means identifying the poor based
mainly on a universally accepted benchmark of PES (physiological,
economic and social) requirements for survival. (this is a standard
approach in development economics wc works well to
operationalize poverty concept)
Critical threshold point- minimum “acceptable income or
consumption ”- this def. Will vary, sometimes based on purchasing
power equivalent to buy min. Caloric intake and no more.
Very poor countries like India- poverty line is calculated by using
estimates of expenditures required to guarantee a min.
Consumption of calories. Where caloric estimate=intake to
maintain health and ability to work
Wealthier countries- clothing and shelter is often added
No uniform standard in determining poverty line,there is difficulty
to make accurate comparisons of poverty across countries or
within countries