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A normal relationship ? Poverty, growth, and inequality

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Author Info

  • Lopez, Humberto
  • Serven, Luis

Abstract

Using a large cross-country income distribution dataset spanning close to 800 country-year observations from industrial and developing countries, the authors show that the size distribution of per capita income is well approximated empirically by a lognormal density. The null hypothesis that per capita income follows a lognormal distribution cannot be rejected-although the same hypothesis is unambiguously rejected when applied to per capita consumption. The authors show that lognormality of per capita income has important implications for the relative roles of income growth and inequality changes in poverty reduction. When poverty reduction is the overriding policy objective, poorer and relatively equal countries may be willing to tolerate modest increases in income inequality in exchange for faster growth-more so than richer and highly unequal countries.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 3814.

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Date of creation: 01 Jan 2006
Date of revision:
Handle: RePEc:wbk:wbrwps:3814

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Related research

Keywords: Achieving Shared Growth; Inequality; Economic Conditions and Volatility; Services&Transfers to Poor; Poverty Impact Evaluation;

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Citations

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Cited by:
  1. Beck, T.H.L. & Demirgüc-Kunt, A. & Martinez Peria, M., 2008. "Banking services for everyone? Barriers to bank access and use around the world," Open Access publications from Tilburg University urn:nbn:nl:ui:12-3159645, Tilburg University.
  2. Jaya Krishnakumar & Cristian Ugarte, 2011. "The effect of growth on poverty reduction," Research Papers by the Department of Economics, University of Geneva 11061, Département des Sciences Économiques, Université de Genève.
  3. Lopez, Humberto, 2006. "Did growth become less pro-poor in the 1990s ?," Policy Research Working Paper Series 3931, The World Bank.
  4. Acosta, Pablo & Calderon, Cesar & Fajnzylber, Pablo & Lopez, Humberto, 2008. "What is the Impact of International Remittances on Poverty and Inequality in Latin America?," World Development, Elsevier, vol. 36(1), pages 89-114, January.
  5. Ravallion, Martin, 2009. "Why don't we see poverty convergence ?," Policy Research Working Paper Series 4974, The World Bank.
  6. Kutzbach, Mark J., 2009. "Motorization in developing countries: Causes, consequences, and effectiveness of policy options," Journal of Urban Economics, Elsevier, vol. 65(2), pages 154-166, March.
  7. Goñi, Edwin & Humberto López, J. & Servén, Luis, 2011. "Fiscal Redistribution and Income Inequality in Latin America," World Development, Elsevier, vol. 39(9), pages 1558-1569, September.
  8. Valpy FitzGerald, 2008. "Economic development and fluctuations in earnings inequality in the very long run: The evidence from Latin America 1900-2000," Journal of International Development, John Wiley & Sons, Ltd., vol. 20(8), pages 1028-1048.
  9. Kochanowicz, Jacek & Rymaszewska, Joanna & Tyrowicz, Joanna, 2008. "Intra-Provincial Inequalities and Economic Growth in China," MPRA Paper 15044, University Library of Munich, Germany.
  10. Vincenzo Lombardo, 2008. "Growth and inequality effects on poverty reduction in Italy," Discussion Papers 9_2008, D.E.S. (Department of Economic Studies), University of Naples "Parthenope", Italy.
  11. Klinger, Bailey & Lederman, Daniel, 2006. "Innovation and export portfolios," Policy Research Working Paper Series 3983, The World Bank.
  12. Jiandong Chen & Dai Dai & Ming Pu & Wenxuan Hou & Qiaobin Feng, 2010. "The trend of the Gini coefficient of China," Brooks World Poverty Institute Working Paper Series 10910, BWPI, The University of Manchester.
  13. Luebker, Malte, 2012. "Income Inequality, Redistribution and Poverty: Contrasting rational choice and behavioural perspectives," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  14. van Ruijven, Bas J. & van Vuuren, Detlef P. & de Vries, Bert J.M. & Isaac, Morna & van der Sluijs, Jeroen P. & Lucas, Paul L. & Balachandra, P., 2011. "Model projections for household energy use in India," Energy Policy, Elsevier, vol. 39(12), pages 7747-7761.
  15. Easterly, William, 2009. "How the Millennium Development Goals are Unfair to Africa," World Development, Elsevier, vol. 37(1), pages 26-35, January.
  16. Lopez , J. Humberto & Perry, Guillermo, 2008. "Inequality in Latin America : determinants and consequences," Policy Research Working Paper Series 4504, The World Bank.

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