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Roles of income and equality in poverty reduction: recent cross-country evidence

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  • Rati Ram

    (Economics Department, Illinois State University, Normal, Illinois, USA)

Abstract

This paper uses a reasonable model and recent cross-country data to study empirically the effects of income and equality on poverty. Three main points are noted. First, the estimates show highly significant roles of income and equality in poverty reduction, and the effects of increased income and lower inequality are both substantial. Second, the elasticity of poverty with respect to inequality is substantially larger than that relative to income. Third, the estimates suggest a 'growth elasticity' of poverty that is much smaller than the values used in almost every study. Therefore, most of the well-known and influential recent research seems to have overstated the impact of income growth on poverty alleviation by de-emphasising the role of inequality, to which poverty is highly responsive, and by using an income (growth) elasticity of poverty that is much larger than what seems reasonable. Copyright © 2007 John Wiley & Sons, Ltd.

Suggested Citation

  • Rati Ram, 2007. "Roles of income and equality in poverty reduction: recent cross-country evidence," Journal of International Development, John Wiley & Sons, Ltd., vol. 19(7), pages 919-926.
    • Handle: RePEc:wly:jintdv:v:19:y:2007:i:7:p:919-926
    DOI: 10.1002/jid.1348
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    References listed on IDEAS

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    1. Ravallion, Martin, 1997. "Can high-inequality developing countries escape absolute poverty?," Economics Letters, Elsevier, vol. 56(1), pages 51-57, September.
    2. Howard White, 2001. "National and international redistribution as tools for poverty reduction," Journal of International Development, John Wiley & Sons, Ltd., vol. 13(3), pages 343-351.
    3. Squire, Lyn, 1993. "Fighting Poverty," American Economic Review, American Economic Association, vol. 83(2), pages 377-382, May.
    4. Hulya Dagdeviren & Rolph Van Der Hoeven & John Weeks, 2002. "Poverty Reduction with Growth and Redistribution," Development and Change, International Institute of Social Studies, vol. 33(3), pages 383-413, June.
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    1. Ahmed Raza Cheema & Ahmed Raza Cheema, 2012. "Poverty, Income Inequality, and Growth in Pakistan: A Pooled Regression Analysis," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 17(2), pages 137-157, July-Dec.
    2. Chambers, Dustin & McLaughlin, Patrick & Stanley, Laura, 2018. "Regulation and Poverty: An Empirical Examination of the Relationship between the Incidence of Federal Regulation and the Occurrence of Poverty across the States," Working Papers 07672, George Mason University, Mercatus Center.
    3. Purwono, Rudi & Wardana, Wahyu Wisnu & Haryanto, Tri & Khoerul Mubin, M., 2021. "Poverty dynamics in Indonesia: empirical evidence from three main approaches," World Development Perspectives, Elsevier, vol. 23(C).
    4. Dustin Chambers & Patrick A. McLaughlin & Laura Stanley, 2019. "Regulation and poverty: an empirical examination of the relationship between the incidence of federal regulation and the occurrence of poverty across the US states," Public Choice, Springer, vol. 180(1), pages 131-144, July.
    5. Cuong V. Nguyen & Nguyet M. Pham, 2018. "Economic growth, inequality, and poverty in Vietnam," Asian-Pacific Economic Literature, The Crawford School, The Australian National University, vol. 32(1), pages 45-58, May.

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