Chapter 6 Poverty, Malnutrition and Income Inequality
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Transcript of Chapter 6 Poverty, Malnutrition and Income Inequality
CHAPTER 6 ©E.Wayne Nafziger Development Economics
Chapter 6
Poverty, Malnutrition and Income Inequality
CHAPTER 6 ©E.Wayne Nafziger Development Economics
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.
CHAPTER 6 ©E.Wayne Nafziger Development Economics
CHAPTER 6 ©E.Wayne Nafziger Development Economics
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).
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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.
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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.
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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.
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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.
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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.
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Poverty as multidimensional1. Poverty consists of interlocked dimensions, yet
lack of food dominant.2. Poverty has important psychological dimensions,
such as powerlessness, voicelessness, dependency, shame, and humiliation.
3. Poor people lack access to basic infrastructure – roads, transportation, & clean water.
4. Education offers escape if economic environment favorable & quality of education is good.
5. Poor health & illness source of destitution. 6. Assets – physical, human, social, and
environmental – crucial. Has gender dimension (Narayan et al. 2000:4-5).
CHAPTER 6 ©E.Wayne Nafziger Development Economics
CHAPTER 6 ©E.Wayne Nafziger Development Economics
CHAPTER 6 ©E.Wayne Nafziger Development Economics
$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).
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CHAPTER 6 ©E.Wayne Nafziger Development Economics
Table 6-1 Table 6-3 & Figure 6-5
show poverty rates over time and
by region.
CHAPTER 6 ©E.Wayne Nafziger Development Economics
CHAPTER 6 ©E.Wayne Nafziger Development Economics
CHAPTER 6 ©E.Wayne Nafziger Development Economics
CHAPTER 6 ©E.Wayne Nafziger Development Economics
CHAPTER 6 ©E.Wayne Nafziger Development Economics
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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.
CHAPTER 6 ©E.Wayne Nafziger Development Economics
CHAPTER 6 ©E.Wayne Nafziger Development Economics
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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.
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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.
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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.
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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.
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CHAPTER 6 ©E.Wayne Nafziger Development Economics
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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.
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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.
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CHAPTER 6 ©E.Wayne Nafziger Development Economics
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).
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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.
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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.
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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.
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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.
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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.
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Income equality vs. growth
Controversy (pp. 210-212)
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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.
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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).