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    9 Poverty and Income Distribution

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    Nestor Dela Cruz
    This document discusses poverty, inequality, and policies to reduce poverty. It defines measures to quantify poverty such as headcount ratios and poverty gaps. It examines aspects of rural and urban poverty, noting that rural poverty is associated with a lack of productive assets and opportunities while urban poverty stems from a lack of human capital. Labor markets are characterized by a dualism between formal and informal sectors with lower wages in informal sectors where most of the poor work. The document recommends policies like redistributing assets, increasing access to education and training, implementing progressive taxation, and providing more subsidies and transfers to help reduce poverty.

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    9 Poverty and Income Distribution

    Uploaded by

    Nestor Dela Cruz
    6 views2 pages
    This document discusses poverty, inequality, and policies to reduce poverty. It defines measures to quantify poverty such as headcount ratios and poverty gaps. It examines aspects of rural and urban poverty, noting that rural poverty is associated with a lack of productive assets and opportunities while urban poverty stems from a lack of human capital. Labor markets are characterized by a dualism between formal and informal sectors with lower wages in informal sectors where most of the poor work. The document recommends policies like redistributing assets, increasing access to education and training, implementing progressive taxation, and providing more subsidies and transfers to help reduce poverty.

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    Economics Lesson

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    This document discusses poverty, inequality, and policies to reduce poverty. It defines measures to quantify poverty such as headcount ratios and poverty gaps. It examines aspects of rural and urban poverty, noting that rural poverty is associated with a lack of productive assets and opportunities while urban poverty stems from a lack of human capital. Labor markets are characterized by a dualism between formal and informal sectors with lower wages in informal sectors where most of the poor work. The document recommends policies like redistributing assets, increasing access to education and training, implementing progressive taxation, and providing more subsidies and transfers to help reduce poverty.

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    © All Rights Reserved
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    6 views2 pages

    9 Poverty and Income Distribution

    Uploaded by

    Nestor Dela Cruz
    This document discusses poverty, inequality, and policies to reduce poverty. It defines measures to quantify poverty such as headcount ratios and poverty gaps. It examines aspects of rural and urban poverty, noting that rural poverty is associated with a lack of productive assets and opportunities while urban poverty stems from a lack of human capital. Labor markets are characterized by a dualism between formal and informal sectors with lower wages in informal sectors where most of the poor work. The document recommends policies like redistributing assets, increasing access to education and training, implementing progressive taxation, and providing more subsidies and transfers to help reduce poverty.

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    © All Rights Reserved
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    De La Salle Araneta University

    Salvador Araneta Campus, Victoneta Ave., Malabon City

    9 Poverty and Income Distribution

    At the end of the module, students must be able to:

    ▪ Recognize the measures of poverty and inequality


    ▪ Understand the relationship between inequality and economic growth

    Poverty tends to perpetuate itself since the children of the poor tend to remain poor. This is
    sometimes called the “vicious circle” of poverty.

    Poverty tends to be concentrated in countries that are in the “tropics”. This has led some to
    believe in a “climatic” theory of development.

    Measures of Poverty

    There are several ways to measure poverty. The head count ratio is the simplest and most widely
    used (q/n) where q is the number of people below the poverty line and n is the population size.

    Other measures include the poverty gap.

    Measures of Inequality

    Inequality pertains to the “fairness” in the distribution of income in the population. In other
    words, the gap between the rich and the poor.

    But what is “fair” and “not fair” is subjective.

    Aspects of Rural Poverty

    Poverty is usually associated with the lack of ownership of productive assets. Lack of physical
    resources in rural areas relates primarily to land and agriculture. Education and educational
    opportunities are also low in rural areas and this inhibits mobility out of agriculture.with the little
    knowledge, the rural poor have difficulty in adopting new technology.

    30
    De La Salle Araneta University
    Salvador Araneta Campus, Victoneta Ave., Malabon City

    Medical problems among the rural poor – stemming from limited access to clean water and good
    sanitation - can sap resources.

    Aspects of Urban Poverty

    Migrants from rural areas to the city constitute the bulk of the urban poor. Lack of human capital
    is the main reason for poverty in urban areas.

    Poor in urban areas are primarily self-employed or working in small-scale establishments. These
    include food stalls, selling newspapers and cigarettes, repairing bicycles, those engaged in shoe
    shine and repair, pedicab and tricycle drivers, garbage collectors.

    Labor Absorption and Employment

    Most Asian labor markets are characterized by “market dualism”. Wages are much higher in the
    formal sector than in the informal sector. Most of the poor are precluded from the formal sector
    due to lack of skills.

    Policies to Further Reduce Poverty

    Redistribution of physical assets, insofar as politically feasible, including land. Give the poor
    better access to education, on the job training, short training courses to develop specific skills.

    Implement a progressive tax program without loopholes for the rich and also a tax on
    intergenerational transfer of wealth. Increase subsidies and direct transfers to the poor.

    Activity
    Explain:

    a. Who are the poor?


    b. Why are people poor?
    c. What are your suggested policy recommendations to ease poverty?

    31

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