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Can high-inequality developing countries escape absolute poverty?

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Ravallion, Martin

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Abstract

Do the poor face the same prospects for escaping poverty in high-inequality developing countries as in low-inequality countries? Is it possible for inequality to be so great as to stifle prospects of reducing absolute poverty, even when other initial conditions and policies are favorable to growth? Household survey data for developing countries suggest that initial distribution does affect how much the poor share in rising average incomes. Higher initial inequality tends to reduce growth's impact on absolute poverty. By the same token, higher inequality diminishes the adverse impact on the poor of general economic contraction. Combining this evidence with that from recent investigations of inequality's effect on growth, the author finds that, if inequality is high enough, countries that would have very good growth prospects at low levels of inequality may see little or no overall growth and little progress in reducing poverty - or even a worsening on both counts. The data the author uses suggest that such cases do occur. The precision with which key parameters have been estimated makes it difficult to say with confidence how common such cases are, but they appear to be in the minority. What appear to be the best available estimates suggest that about one-fifth of the spells between surveys he analyzed were cases in which poverty was rising, yet positive growth in the mean (and hence falling poverty) is predicted at zero inequality. Inequality can be high enough to result in rising poverty despite good underlying growth prospects.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 1775.

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Date of creation: 30 Jun 1997
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Handle: RePEc:wbk:wbrwps:1775

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Keywords: Services&Transfers to Poor Health Monitoring&Evaluation Economic Conditions and Volatility Public Health Promotion Health Economics&Finance Pro-Poor Growth and Inequality Governance Indicators Inequality Economic Conditions and Volatility Poverty Assessment

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  1. Fields, Gary S, 1989. "Changes in Poverty and Inequality in Developing Countries," World Bank Research Observer, Oxford University Press, vol. 4(2), pages 167-85, July.
  2. Ravallion, Martin & Datt, Gaurav & van de Walle, Dominique, 1991. "Quantifying Absolute Poverty in the Developing World," Review of Income and Wealth, Blackwell Publishing, vol. 37(4), pages 345-61, December.
  3. Alesina, Alberto & Rodrik, Dani, 1994. "Distributive Politics and Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 109(2), pages 465-90, May. [Downloadable!] (restricted)
    Other versions:
  4. Squire, Lyn, 1993. "Fighting Poverty," American Economic Review, American Economic Association, vol. 83(2), pages 377-82, May. [Downloadable!] (restricted)
  5. Lipton, Michael & Ravallion, Martin, 1993. "Poverty and policy," Policy Research Working Paper Series 1130, The World Bank. [Downloadable!]
    Other versions:
    • Lipton, Michael & Ravallion, Martin, 1995. "Poverty and policy," Handbook of Development Economics, in: Hollis Chenery† & T.N. Srinivasan (ed.), Handbook of Development Economics, edition 1, volume 3, chapter 41, pages 2551-2657 Elsevier. [Downloadable!] (restricted)
  6. Kakwani, Nanak, 1993. "Poverty and Economic Growth with Application to Cote d'Ivoire," Review of Income and Wealth, Blackwell Publishing, vol. 39(2), pages 121-39, June.
  7. Ravallion, Martin & Chen, Shaohua, 1997. "What Can New Survey Data Tell Us about Recent Changes in Distribution and Poverty?," World Bank Economic Review, Oxford University Press, vol. 11(2), pages 357-82, May.
    Other versions:
  8. Clarke, George R. G., 1995. "More evidence on income distribution and growth," Journal of Development Economics, Elsevier, vol. 47(2), pages 403-427, August. [Downloadable!] (restricted)
    Other versions:
  9. Foster, James & Greer, Joel & Thorbecke, Erik, 1984. "A Class of Decomposable Poverty Measures," Econometrica, Econometric Society, vol. 52(3), pages 761-66, May. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Paul Gamba & Elliot Mghenyi, 2005. "Rural Poverty Dynamics, Agricultural Productivity and Access to Resources," International Development Collaborative Working Papers KE-TEGEMEO-WP-21, Department of Agricultural Economics, Michigan State University. [Downloadable!]
  2. Daniel Suryadarma & Rima Prama Artha & Asep Suryahadi & Sudarno Sumarto, 2005. "A Reassessment of Inequality and Its Role in Poverty Reduction in Indonesia," Development Economics Working Papers 525, East Asian Bureau of Economic Research. [Downloadable!]
  3. Adams, Richard H. Jr., 2003. "Economic growth, inequality, and poverty : findings from a new data set," Policy Research Working Paper Series 2972, The World Bank. [Downloadable!]
  4. Kraay, Aart, 2004. "When is growth pro-poor? Cross-country evidence," Policy Research Working Paper Series 3225, The World Bank. [Downloadable!]
    Other versions:
  5. Easterly, William, 2001. "The effect of International Monetary Fund and World Bank programs on poverty," Policy Research Working Paper Series 2517, The World Bank. [Downloadable!]
  6. Smita Wagh & Sanjeev Gupta & Catherine A. Pattillo, 2007. "Impact of Remittances on Poverty and Financial Development in Sub-Saharan Africa," IMF Working Papers 07/38, International Monetary Fund. [Downloadable!]
  7. Wodon, Quentin T., 1999. "Growth, poverty, and inequality : a regional panel for Bangladesh," Policy Research Working Paper Series 2072, The World Bank. [Downloadable!]
  8. Hertel, Thomas W. & Keeney, Roman & Ivanic, Maros & Winters, L. Alan, 2006. "Distributional effects of WTO agricultural reforms in rich and poor countries," Policy Research Working Paper Series 4060, The World Bank. [Downloadable!]
    Other versions:
  9. Jean-Yves Duclos & Philippe Gregoire, 2001. "Absolute and Relative Deprivation and the Measurement of Poverty," UFAE and IAE Working Papers 477.01, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC). [Downloadable!]
    Other versions:
  10. Puja Vasudeva Dutta, 2005. "Accounting for Wage Inequality in India," PRUS Working Papers 29, Poverty Research Unit at Sussex, University of Sussex. [Downloadable!]
  11. Patricia Justino & Julie Litchfield & Yoko Niimi, 2004. "Multidimensional Inequality: An Empirial Application to Brazil," PRUS Working Papers 24, Poverty Research Unit at Sussex, University of Sussex. [Downloadable!]
  12. Heshmati, Almas, 2004. "Growth, Inequality and Poverty Relationships," IZA Discussion Papers 1338, Institute for the Study of Labor (IZA). [Downloadable!]
  13. Otter, Thomas, 2007. "Does Inequality Harm Income Mobility and Growth? An Assessment of the Growth Impact of Income and Education Inequality in Paraguay 1992 – 2002," Proceedings of the German Development Economics Conference, Göttingen 2007 25, Verein für Socialpolitik, Research Committee Development Economics. [Downloadable!]
  14. Jean-Pierre Lachaud, 2006. "La mesure de la croissance pro-pauvres en Afrique : espace de l’utilité ou des capacités ? Analyse comparative appliquée au Burkina Faso," Documents de travail 122, Centre d'Economie du Développement de l'Université Montesquieu Bordeaux IV. [Downloadable!]
  15. Anne Epaulard, 2003. "Macroeconomic Performance and Poverty Reduction," IMF Working Papers 03/72, International Monetary Fund. [Downloadable!]
  16. Schipper, Youdi & Hoogeveen, Johannes G., 2005. "Which inequality matters? Growth evidence based on small area welfare estimates in Uganda," Policy Research Working Paper Series 3592, The World Bank. [Downloadable!]
  17. Gabriele, Alberto & Schettino, Francesco, 2007. "Child Malnutrition and Mortality in Developing Countries: Evidence from a Cross-Country Analysis," MPRA Paper 3132, University Library of Munich, Germany, revised Jul 2007. [Downloadable!]
  18. Talat Anwar, 2003. "Trends in Inequality in Pakistan between 1998-99 and 2001-02," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 42(4), pages 809-821. [Downloadable!]
  19. François Bourguignon & Francisco de Hollanda Guimarães Ferreira, 2000. "Understanding inequality in Brazil: a conceptual overview," Textos para discussão 434, Department of Economics PUC-Rio (Brazil). [Downloadable!]
  20. Klump, Rainer & Prüfer, Patricia, 2005. "How to prioritise policies for poverty reduction: Applying Bayesian Model Averaging to Vietnam," Proceedings of the German Development Economics Conference, Kiel 2005 27, Verein für Socialpolitik, Research Committee Development Economics. [Downloadable!]
  21. Juan Luis Londoño & Miguel Székely, 2000. "Persistent Poverty and Excess Inequality: Latin America, 1970-1995," Journal of Applied Economics, Universidad del CEMA, vol. 0, pages 93-134, May. [Downloadable!]
  22. Nancy Birdsall, 2007. "Income Distribution: Effects on Growth and Development," Working Papers 118, Center for Global Development. [Downloadable!]
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