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Growth, Income Distribution, and Poverty: A Review

Listed author(s):
  • Bigsten , Arne

    (Department of Economics, School of Economics and Commercial Law, Göteborg University)

  • Levin, Jörgen

    (Department of Economics, School of Economics and Commercial Law, Göteborg University)

This paper reviews the recent literature dealing with the relationships between economic growth, income distribution, and poverty. This generally fails to find any systematic pattern of change in income distribution during recent decades. Neither does it find any systematic link from fast growth to increasing inequality. Some recent empirical evidence has tended to confirm the negative impact of inequality on growth, on the other hand. Others have found that the level of initial income inequality is not a robust explanatory factor of growth, though high inequality in the distribution of assets, such as land, has a significantly negative effect on growth. Possible channels are credit rationing, reduced possibilities for participation in the political process, and social conflicts. Among the strategic elements that contributed to reduced poverty are: an outward-oriented strategy of export-led growth, based on labour-intensive manufacturing; agricultural and rural development, with encouragement of new technologies; investment in physical infrastructure and human capital; efficient institutions that provide the right set of incentives to farmers and entrepreneurs; and social policies to promote health, education, and social capital, as well as safety nets to protect the poor. Countries that have been successful in terms of economic growth are also very likely to be successful in reducing poverty. Poverty can be reduced if there is sufficient economic growth. Growth can be substantial if the policy and institutional environment is right.

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Paper provided by University of Gothenburg, Department of Economics in its series Working Papers in Economics with number 32.

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Length: 36 pages
Date of creation: 13 Nov 2000
Publication status: Published in Growth, Inequality, and Poverty - Prospects for Pro-Poor Economic Development, Shorrocks, Anthony, van der Hoeven, Rolph (eds.), 2004, chapter 12, Oxford University Press.
Handle: RePEc:hhs:gunwpe:0032
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Department of Economics, School of Business, Economics and Law, University of Gothenburg, Box 640, SE 405 30 GÖTEBORG, Sweden

Phone: 031-773 10 00
Web page: http://www.handels.gu.se/econ/

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