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Inequality and the Dynamics of Poverty and Growth

  • Ali A. Ali
  • Ibrahim A. Elbadawi
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    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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    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
    Date of revision:
    Handle: RePEc:wop:cidhav:32
    Contact details of provider: Postal: Center for International Development at Harvard University (CID). 79 John F. Kennedy Street, Cambridge, MA 02138.
    Fax: 617-496-2554
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    4. repec:tpr:qjecon:v:115:y:2000:i:4:p:1167-1199 is not listed on IDEAS
    5. 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.
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    7. Torsten Persson & Guido Tabellini, 1991. "Is Inequality Harmful for Growth? Theory and Evidence," NBER Working Papers 3599, National Bureau of Economic Research, Inc.
    8. Rodrik, Dani, 1999. " Where Did All the Growth Go? External Shocks, Social Conflict, and Growth Collapses," Journal of Economic Growth, Springer, vol. 4(4), pages 385-412, December.
    9. 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.
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    18. 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.
    19. 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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