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Inequality and the Dynamics of Poverty and Growth

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  • Ali A. Ali
  • Ibrahim A. Elbadawi
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    Abstract

    This paper models the dynamic interactions between growth and distribution in the analysis of the behavior of poverty over time. The model permits formal analysis of the factors that led to the growth collapse as well as the rise in poverty in Africa and other developing regions, except Asia, during 1975-96 period. Using indicators of average country performance during this period-- in terms of the rate of acceleration of growth, changes in poverty and extent of inequality—the model suggests tentative strategies for dealing with poverty. The main policy recommendation of this analysis is that, for the majority of countries—36 out of 47—any serious strategy for poverty reduction must include both policies for accelerating growth as well as measures for effecting more equitable income distribution. Moreover, the latter must be sufficiently deep either to shake-off the "transitional", though lingering, "low equilibrium trap" that characterizes some economies; or to more others from the "bad" equilibrium of stationary, but high, poverty.

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    File URL: http://www.cid.harvard.edu/cidwp/pdf/032.pdf
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    Bibliographic Info

    Paper provided by Center for International Development at Harvard University in its series CID Working Papers with number 32.

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    Date of creation: Dec 1999
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    Handle: RePEc:wop:cidhav:32

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    Web page: http://www.cid.harvard.edu/cidwp/
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    1. Ahluwalia, Montek S., 1976. "Inequality, poverty and development," Journal of Development Economics, Elsevier, vol. 3(4), pages 307-342, December.
    2. Hongyi Li & Lyn Squire & Tao Zhang & Heng-fu Zou, 1999. "A Data Set on Income Distribution," CEMA Working Papers 575, China Economics and Management Academy, Central University of Finance and Economics.
    3. Klaus Deininger & Lyn Squire, 1996. "A New Data Set Measuring Income Inequality," CEMA Working Papers 512, China Economics and Management Academy, Central University of Finance and Economics.
    4. Persson, Torsten & Tabellini, Guido, 1991. "Is Inequality Harmful for Growth? Theory and Evidence," CEPR Discussion Papers 581, C.E.P.R. Discussion Papers.
    5. Rodrik, Dani, 1998. "Where Did all the Growth Go? External Shocks, Social Conflict and Growth Collapses," CEPR Discussion Papers 1789, C.E.P.R. Discussion Papers.
    6. Easterly, William & Kremer, Michael & Pritchett, Lant & Summers, Lawrence H., 1993. "Good policy or good luck?: Country growth performance and temporary shocks," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 459-483, December.
    7. David E. Bloom & Jeffrey D. Sachs, 1998. "Geography, Demography, and Economic Growth in Africa," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 29(2), pages 207-296.
    8. Rodrik, Dani & Alesina, Alberto, 1994. "Distributive Politics and Economic Growth," Scholarly Articles 4551798, Harvard University Department of Economics.
    9. Domowitz, Ian & Elbadawi, Ibrahim, 1987. "An error-correction approach to money demand : The case of Sudan," Journal of Development Economics, Elsevier, vol. 26(2), pages 257-275, August.
    10. Acemoglu, Daron & Robinson, James A, 1998. "Why did the West Extend the Franchise? Democracy, Inequality and Growth in Historical Perspective," CEPR Discussion Papers 1797, C.E.P.R. Discussion Papers.
    11. Easterly, William & Loayza, Norman & Montiel, Peter, 1997. "Has Latin America's post-reform growth been disappointing?," Policy Research Working Paper Series 1708, The World Bank.
    12. Anand, Sudhir & Kanbur, S. M. R., 1993. "The Kuznets process and the inequality--development relationship," Journal of Development Economics, Elsevier, vol. 40(1), pages 25-52, February.
    13. Anand, Sudhir & Kanbur, S. M. R., 1993. "Inequality and development A critique," Journal of Development Economics, Elsevier, vol. 41(1), pages 19-43, June.
    14. Bruno, Michael & Ravallion, Martin & Squire, Lyn, 1996. "Equity and growth in developing countries : old and new perspectives on the policy issues," Policy Research Working Paper Series 1563, The World Bank.
    15. Aghion, Philippe & Bolton, Patrick, 1997. "A Theory of Trickle-Down Growth and Development," Review of Economic Studies, Wiley Blackwell, vol. 64(2), pages 151-72, April.
    16. Minami, Ryoshin, 1998. "Economic Development and Income Distribution in Japan: An Assessment of the Kuznets Hypothesis," Cambridge Journal of Economics, Oxford University Press, vol. 22(1), pages 39-58, January.
    17. Dani Rodrik, 1998. "Why Do More Open Economies Have Bigger Governments?," Journal of Political Economy, University of Chicago Press, vol. 106(5), pages 997-1032, October.
    18. Ahluwalia, Montek S. & Carter, Nicholas G. & Chenery, Hollis B., 1979. "Growth and poverty in developing countries," Journal of Development Economics, Elsevier, vol. 6(3), pages 299-341, August.
    19. Shaohua Chen & Datt, Gaurav & Ravallion, Martin, 1993. "Is poverty increasing in the developing world?," Policy Research Working Paper Series 1146, The World Bank.
    20. Banerjee, Abhijit & Newman, Andrew F, 1998. "Information, the Dual Economy, and Development," Review of Economic Studies, Wiley Blackwell, vol. 65(4), pages 631-53, October.
    21. Li, Hongyi & Zou, Heng-fu, 1998. "Income Inequality Is Not Harmful for Growth: Theory and Evidence," Review of Development Economics, Wiley Blackwell, vol. 2(3), pages 318-34, October.
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    Cited by:
    1. Ali AbdelGadir Ali, . "Internal Substainability and Economic Growth in The Arab States," API-Working Paper Series 0102, Arab Planning Institute - Kuwait, Information Center.
    2. Lelli, Sara, 2004. "What Money Can't Buy: The Relevance of Income Redistribution for Functioning Levels," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
    3. Janvier D. Nkurunziza & Floribert Ngaruko, 2004. "Explaining Growth in Burundi: 1960-2000," Macroeconomics 0409012, EconWPA.
    4. Alexander Cotte Poveda, 2006. "Crecimiento, Desigualdad Y Pobreza: Un Análisis De La Violencia En Colombia," SERIE DE DOCUMENTOS EN ECONOMÍA Y VIOLENCIA 002233, CENTRO DE INVESTIGACIONES EN VIOLENCIA, INSTITUCIONES Y DESARROLLO ECONÓMICO (VIDE).

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