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Chapter 6 Poverty, Malnutrition and Income Inequality. Poverty, Malnutrition & Income Inequality. How can we provide a good quality of life & productive work for the 700-1000 million (10-15%) of world’s 6.5 billion people who are poor or living on no more than $1 a day?

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Chapter 6 Poverty, Malnutrition and Income Inequality

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Chapter 6

Poverty, Malnutrition and Income Inequality


Poverty, Malnutrition & Income Inequality

  • How can we provide a good quality of life & productive work for the 700-1000 million (10-15%) of world’s 6.5 billion people who are poor or living on no more than $1 a day?

  • Economic growth is the most important factor contributing to poverty reduction (Fig. 6-1).

  • Country in which you live determines your position in world’s economic class system.

  • Milanovic (2002): 88% of 1993 world inequality from between-country inequality.


Information sparsity

  • International Labour Organization – using data for policy is like trying to run through the forest in the dark without a flashlight.

  • Presently cross-national figures on poverty and inequality but few by region or community within a nation.

  • Identifying and reaching the poor to enable their geographical targeting requires detailed poverty mapping, with data on poverty assessment and “basic needs” indicators at local levels (San Martin 2003).

  • Few national surveys are adequate for “guid[ing] poverty alleviation efforts aimed at attacking poverty at local levels” (ibid., 2003, p. 173).


Fields on minimal data standards

(1) the database actual household survey or census;

(2) encompass all income, including nonwage income;

(3) include local price information, including rural-urban cost-of-living differences;

(4) national in coverage;

(5) disaggregated at the canton, district, or county level;

(6) avoid lags between collection and publication, and

long gaps between survey rounds; and

(7) to compare across time, surveys, measures, and the

income concept and recipient unit must be constant.


Also

  • For time-series consumption or income, household data and poverty lines need to be adjusted for inflation, frequently with high inflation rates.

  • Should have information on non-cash income such as food and other goods produced at home.

  • Yet a few careful studies.


Topics to be discussed

  • Multifaceted nature of poverty.

  • Global income inequality.

  • $1/day and $2/day poverty.

  • Global and regional poverty.

  • Effect of poverty on access to education and

    health.

  • Poverty since the 19th century.

  • Sen’s 3 measures of poverty and deprivation.

  • Sen’s capabilities approach to poverty.


Topics to be discussed (cont)

  • Lorenz curve & Gini index for income distribution.

  • Poverty – World Bank, Bhalla, & Sala-i-Martin.

  • Kuznets’s inverted-U explanation for changes in income distribution with growth.

  • Adelman and Morris’s dual-economy stage theory of the inverted-U curve.

  • Differences in poverty and inequality by:

    • low-, middle-, and high-income countries;

    • DCs and LDCs;

    • slow- and fast-growing countries; and

    • gender.


Topics to be discussed (cont)

  • Accompaniments of absolute poverty.

  • Subgroups hurt by poverty.

  • Case studies of LDC policies.

  • Policies to reduce poverty & improve

    income distribution.

  • Relationship between inequality and

    political instability.


Poverty as multidimensional

  • Poverty consists of interlocked dimensions, yet lack of food dominant.

  • Poverty has important psychological dimensions, such as powerlessness, voicelessness, dependency, shame, and humiliation.

  • Poor people lack access to basic infrastructure – roads, transportation, & clean water.

  • Education offers escape if economic environment favorable & quality of education is good.

  • Poor health & illness source of destitution.

  • Assets – physical, human, social, and environmental – crucial. Has gender dimension(Narayan et al. 2000:4-5).


$1/day & $2/day poverty

  • Absolute poverty – below income securing bare essentials of food, clothing, & shelter.

  • Inter-country comparisons difficult although assumed can compare $PPP.

  • World Bank - $PPP1/day & $PPP2/day in 1985, same as $PPP532 & $PPP1064 yearly in 1998.

  • Page 172 indicates diet comparable to poverty line: 2 cups of hot prepared rice, equivalent to 54% of total diet (based on typical gender & age distribution).


Table 6-1 Table 6-3 & Figure 6-5

show poverty rates

over time and

by region.


Sen’s Concepts & Measures of Poverty

  • Emphasizes capabilities not attainments.

  • G, H & I.

  • H: Headcount approach (poverty %).

  • I: Income-gap approach – additional income to bring poor up to poverty line.

  • G: Gini – distribution of income among the poor.


3 measures of poverty:World Bank, Institute of International Economics, & Sala-i-Martin (Tables 6.1- 6.3)

  • Sala-i-Martin – goes beyond 20-percentile quintiles (fifths) of World Bank data to 1-percentile increments by interpolation & testing.

  • Includes China but not Former Soviet Union, Former Yugoslavia, & Bulgaria.

  • Fig. 6-3 (showing falling global income inequality) is consistent with Firebaugh.


3 measures of poverty:World Bank, Institute of International Economics, & Sala-i-Martin (Tables 6.1- 6.3)

  • World Bank (Milanovic) – Sala-i-Martin uses linear extrapolation for quintile shares.

  • - where if a nation has only one point, he assumes constant income shares.

  • - where if a nation has no points, all individuals have income per capita of country.

  • Are data for individual or household? Not certain.

  • No Former Soviet Union, Former Yugoslavia, & Bulgaria; China’s data have large margin of error, so inequality could be either falling or increasing.


3 measures of poverty:World Bank, Institute of International Economics, & Sala-i-Martin (Tables 6.1- 6.3)

  • Bhala (IIE) – World Bank’s consumption based on household surveys that come up with absurd results – average Korean richer than average Swede; Ethiopia is 3 times richer than India.

  • National income consumption not household survey means should be used.

  • Bhalla uses national accounts/household survey multiplier.

  • Agrees with Sala-i-Martin that inequality fell; possible even if many national inequalities increase.

  • Argues that % increase in consumption of poor/% increase in consumption of non-poor > 1.


Bhalla’s argument: imagine no country

  • Shift from world’s lower class (less than $PPP10/day at 1993 prices) to world’s middle class ($PPP10-$PPP40/day).

  • Consumption by the world’s poor, driven largely by China & India, grew more rapidly than consumption by the rich, 1980-2000.


Early & late stages of development – Adelman & Morris

  • Test Kuznets’ hypothesis on inverted-U relationship between per capita income (X-axis) & inequality (Gini) (Y-axis).

  • Assumes dual economy, with growing modern sector share.


Is there evidence for the Kuznets’ inverted U?

  • Yes, for a given time period, as Figure 6-10.

  • More questionable when you examine long-term data for given countries.


Females are the major victims of poverty

  • Need resource allocation within households & families (Dasgupta).

  • Data fail to show gender inequality, a major source of interpersonal inequality.

  • Income inequality would be 30-40% higher if inter-family gender inequality calculated (e.g., 0.57 for South Africa X 1.35 = 0.77; 0.29 Bangladesh X 1.35=0.39).


Sen on “missing women”: low female to male ratio

  • West 105 to 100; sub-Saharan Africa 102; 98 North Africa; 94 China, Bangladesh, & Middle East; 93 India (Kerala 104).

  • With sub-Saharan Africa as benchmark, Sen estimates 44 million missing females in China & 37 million in India.

  • Why? Family directs resources to males.


Accompaniments of absolute poverty for 400-1100 million $1/day

  • 3/5- 4/5 spent on food.

  • 50% undernourished.

  • 2/10 die by 10 years.

  • Immunization rates low.

  • Lack access to safe & plentiful water

    & sanitation.

  • Average life expectancy 45 years.


Accompaniments of absolute poverty for 400-1100 million $1/day

  • 1/3 - 2/5 adults literate.

  • 4/10 complete > 4 years primary school.

  • In environmentally marginal & vulnerable areas, higher rates of unemployment, higher fertility rates.


Poverty groups

  • 4/7 in sub-Saharan Africa; 1/6 East Asia; 1/6 South Asia.

  • Indigenous & minority groups overrepresented.

  • 4/5 live in rural areas; many urban slums.

  • Rural poor landless workers, sharecroppers, tenants, & small landowners.

  • Urban poor unemployed, irregularly employed, menial workers, some small business people.


Poverty groups (cont)

  • Relatively few wage laborers, unemployed compared to DCs.

  • Most illiterate.

  • Women, especially heads of households.

  • 40% children under 10.

  • Elderly poorer.

  • Many live in remote regions, beyond gaze of casual visitor to village – away from roads, markets, & services.


Income equality vs. growth

Controversy (pp. 210-212)


Poverty, inequality, & war

  • Wars & massive state violence occur mostly in low income countries, some of which are failed states.

  • Economic stagnation worsens relative deprivation.

  • Failed states associated with widespread rent seeking.

  • Some predatory states, where elites plunder the economy.


Policies to reduce poverty & inequality

  • Combined discussion of policy issues in Chapter 6, pp. 202-210 and Chapter 7, pp. 245-264 (see Ch. 7 powerpoint).


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