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Links Between Growth, Inequality, and Poverty: A Survey

Author

Listed:
  • Ms. Valerie Cerra
  • Mr. Ruy Lama
  • Norman Loayza

Abstract

Is there a tradeoff between raising growth and reducing inequality and poverty? This paper reviews the theoretical and empirical literature on the complex links between growth, inequality, and poverty, with causation going in both directions. The evidence suggests that growth can be effective in reducing poverty, but its impact on inequality is ambiguous and depends on the underlying sources of growth. The impact of poverty and inequality on growth is likewise ambiguous, as several channels mediate the relationship. But most plausible mechanisms suggest that poverty and inequality reduce growth, at least in the long run. Policies play a role in shaping these relationships and those designed to improve equality of opportunity can simultaneously improve inclusiveness and growth.

Suggested Citation

  • Ms. Valerie Cerra & Mr. Ruy Lama & Norman Loayza, 2021. "Links Between Growth, Inequality, and Poverty: A Survey," IMF Working Papers 2021/068, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2021/068
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    Cited by:

    1. Agussalim Agussalim & Nursini Nursini & Sultan Suhab & Randi Kurniawan & Salman Samir & Tawakkal Tawakkal, 2024. "The Path to Poverty Reduction: How Do Economic Growth and Fiscal Policy Influence Poverty Through Inequality in Indonesia?," Economies, MDPI, vol. 12(12), pages 1-17, November.
    2. Rodica Pisica, 2022. "Effects of Income Inequality on Economic Growth: The Case of the Republic of Moldova," Ovidius University Annals, Economic Sciences Series, Ovidius University of Constantza, Faculty of Economic Sciences, vol. 0(1), pages 407-416, September.
    3. Zaiyang Li & Hassan Swedy Lunku & Shaohua Yang & Agus Salim, 2024. "The dynamic interplay of foreign direct investment and education expenditure on Sub-Saharan Africa income inequality," International Economics and Economic Policy, Springer, vol. 21(3), pages 593-616, July.
    4. Canale, Rosaria Rita & Liotti, Giorgio & Musella, Marco, 2022. "Labour market flexibility and workers’ living conditions in Europe," Structural Change and Economic Dynamics, Elsevier, vol. 62(C), pages 441-450.
    5. Britz, Wolfgang & Jafari, Yaghoob & Nekhay, Olexandr & Roson, Roberto, 2022. "Assessing inequality and poverty in long-term growth projections: A general equilibrium analysis for six developing countries," Economic Modelling, Elsevier, vol. 117(C).
    6. Fatih Elcin, 2024. "Global Consumption Disparities: Unveiling a Persistent Divide," World Journal of Applied Economics, WERI-World Economic Research Institute, vol. 10(1), pages 1-16, June.
    7. Baez Ramirez,Javier Eduardo & Celik,Cigdem & Kshirsagar,Varun Sridhar, 2023. "A Spatial Perspective on Booms and Busts : Evidence from Türkiye," Policy Research Working Paper Series 10553, The World Bank.
    8. Tolkyn Kakizhanova & Asel Sagynbay & Shynggys Nurgazy & Gulmira Andabayeva & Galiya Dauliyeva, 2024. "Impact of Energy Consumption and Food Security on Income Inequality: NARDL Approach from Kazakhstan," International Journal of Energy Economics and Policy, Econjournals, vol. 14(6), pages 184-194, November.
    9. Sèna Kimm Gnangnon, 2024. "Export product quality and inclusivity in developing countries," Economics of Transition and Institutional Change, John Wiley & Sons, vol. 32(3), pages 807-843, July.
    10. Fiza Shaheen & Khalid Zaman & Muhammad Azhar Khan, 2025. "Exploring Pro-Poor Growth Pathways for Poverty Reduction in SAARC Countries: An Empirical Analysis of Inclusive Development for Achieving SDG 1," Journal of Economic Sciences, Federal Urdu University Islamabad, Department of Economics, vol. 4(1), pages 71-90, June.
    11. Suresh Chand Aggarwal, 2022. "Inequality and Inclusive Development: Evidence from Selected Indian States," Indian Journal of Human Development, , vol. 16(1), pages 55-76, April.
    12. Gustavo A. Marrero & Luis Servén, 2022. "Growth, inequality and poverty: a robust relationship?," Empirical Economics, Springer, vol. 63(2), pages 725-791, August.
    13. Janus, Thorsten, 2024. "Does export underreporting contribute to the resource curse?," World Development, Elsevier, vol. 181(C).
    14. Fambeu, Ariel Herbert & Yomi, Patricia Tchawa, 2023. "Is democracy pro poor in Sub-Saharan Africa?," Journal of Policy Modeling, Elsevier, vol. 45(1), pages 10-30.
    15. Gnangnon, Sèna Kimm, 2023. "Export Product Quality and Inclusivity in Developing Countries," EconStor Preprints 274651, ZBW - Leibniz Information Centre for Economics.
    16. Navid Khan & Ke Xing & Salman Mahmood & Riaz Ahmad, 2024. "Key underlying concepts of shared prosperity: insights from a literature review," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 71(3), pages 727-751, September.
    17. Burcu Hacibedel & Pierre Mandon & Priscilla Muthoora & Nathalie Pouokam, 2024. "Inequality, growth fluctuations, and employment," Empirical Economics, Springer, vol. 66(2), pages 587-622, February.
    18. Jose Cuesta & Lucia Madrigal & Natalia Pecorari, 2024. "Social sustainability, poverty and income: An empirical exploration," Journal of International Development, John Wiley & Sons, Ltd., vol. 36(3), pages 1789-1816, April.
    19. Hlasny, Vladimir & Asadullah, M Niaz & Sabra, Alia, 2022. "The Adoption of the Multidimensional Poverty Index in Developing Asia: Implications for Social Program Targeting and Inequality Reduction," Jurnal Ekonomi Malaysia, Faculty of Economics and Business, Universiti Kebangsaan Malaysia, vol. 56(3), pages 185-195.

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