BỘ GIÁO DỤC ĐÀO TẠO TRƯỜNG ĐẠI HỌC CÔNG NGHỆ QUẢN LÝ HỮU TIỂU LUẬN Môn học: Tiếng Anh Topic: ECONOMIC GROWTH, INCOME INEQUALITY A POVERTY REDUCTION Full name: Class. : Hà Nội 2021 Table of Contents CHAPTER 1: Introduction.2 Economic Growth and Income Equality. A Brief Review of the Literature. Comparative Global Studies.1 Regional Trends in Economic Growth, Income Inequality and Poverty.21 CHAPTER 4: Summary and Conclusion.2 Policy Implications and Recommendations.30 Abstract This study examines and compares the implications of economic growth on poverty and income inequality among 76 countries across sub-Saharan Africa (SSA), South and East Asia (SEA), Latin American countries (LAC) and the OECD region for the period 1990 to 2010.
The results using SYS-GMM estimator leads to some interesting findings. We find that economic growth has led to reduction in both income and human poverty levels in all developing regions. We also find that, economic growth translates into little poverty reduction in all the regions when income inequality is high than when it is low. The results also show economic.reduction that economic growth significantly reduced income inequality in SSA.
However, growth led to increase in income inequality in LAC and the OCED region.1 Introduction The eradication of absolute poverty in the developing world has become a major policy objective to most governments and international organisations due to its importance to the general well-being of society. According to the 2013 World Bank report, poverty levels have been trending downwards since the 1980’s. Despite these improvements, extreme poverty still exist in various parts of the developing world with close to one billion people still living under $1.25 a day and some 2.7 billion people living on less than $2. Most of these reduction occurred in middle and high income economic.reduction countries with very few reductions occurring in low income developing countries.
Particular example of such divided progress is the impressive improvements of poverty levels in China and India with the rest of the developing world, particularly low income countries, still experiencing almost the same levels of poverty that existed three decades ago. Though the Millennium Development Goal (MDG) of halving poverty levels by 2015 is achievable, most developing countries still face enormous challenges in fighting poverty. Moreover, other equally important goals such as reductions in child and maternal mortality, gender equality and education are still significant developmental problems in most developing countries. Economic growth has been identified as the most important tool, if not the only mechanism, in the reduction of absolute poverty.
In order to achieve significant economic growth and achieve significant progress in poverty reduction efforts, many developing countries adopted the structural adjustment reforms proposed by the Bretton Woods institutions in the early1980’s. Some of the policies under the structural reforms included the adoption of flexible exchange rate policies and opening up to international trade. These policies attracted foreign investments, hence promoting economic growth. During the 1990’s, the World Bank proposed a more general approach to bringing poverty levels down.
This involved paying attention to environmental issues, investing in human capital, privatization of government owned-enterprises and improving economic development. However, in the early parts of the 2000’s, further emphasis on poverty reduction led to a shift in the process of growth in the developing world. Governments of developing countries were encouraged to formulate their own development economic.reduction programs, thus, the Poverty Reduction Strategy Papers (PRSPs) became an integral part of poverty reduction in the developing world. The PRSPs provided policies and strategies to mitigate poverty by integrating economic and social issues as well as external financial needs into its broad framework.
A comprehensive poverty analysis and plans to address poverty issues form the core of the PRSPs. This became the basis for development assistance and the provision of debt relief to developing countries by World Bank and the International Monetary Fund (IMF) under the Highly Indebted Poor Countries (HIPC) initiative. The intended aim was for countries to meet their MDGs. In many developing countries, the denial of basic human necessities such as shelter, food, education and health care have been identified as some of the main causes of poverty (Cypher and Dietz, 2004).
These human needs form the basis of the MDGs. During the 1990’s, the United Nation Development Plan (UNDP) moved away from the World Bank income based poverty measures to a more human based poverty measure. This led to the introduction of Human Poverty Indices (HPIs) which encompasses the basic human necessities. Primarily, the HPIs are based on three key human deprivations.
The first is deprivation of life. That is how long new born children are expected to live if These important human needs were crucial to the PRSPs. Multilateral and bilateral donors provided aid to developing countries based on the performance of these important indicators outlined in the PRSPs. According to the UNDP Human Development Report 2013, there has been much progress towards reducing global human poverty and the pace has even been faster in lower income countries.
This is a contradiction to the earlier claim by the World Bank because, whereas the World Bank income poverty measures concentrate on the number of people who live below various poverty lines ($1.25 or $2), the human poverty measures concentrate more on human economic. These are very interesting trends which are worth investigating. Over the years, emerging countries have played a significant role in bringing down world poverty levels because of their high levels of economic growth. Ravallion and Chen (2007) claimed that, the significant growth performance of China, India and Brazil have contributed greatly in reducing poverty in the developing world.
In recent years, most countries in Asia have transformed their economies through technological innovations in recent years. These have helped them to produce and export they are subject to the mortality risk that prevails at their time of birth. basic education and the third is of economic provisioning which includes people without access to improved drinking water and underweight children. The second is of more technologically advanced goods such as equipment and intermediate goods.
They have transformed their economies from being predominantly agricultural based to relatively technologically advanced economies. These impressive growth experiences in the region have helped countries such as China and India to grow much faster than most developed countries. In sub-Saharan Africa and Latin America, natural resources and agricultural products dominate growth in the region. The rise in commodity prices before the recent financial crisis boosted growth significantly in the sub-Saharan African region.
Exports of agricultural products, minerals and oil contributed about 70% of export revenue in the region (Africa Development Bank (AFDB) et al, 2013). Over the years, these reforms and policies have helped most developing countries, particularly those in Asia, achieve some success in economic growth. Nonetheless, many developing countries that experienced relatively high rates of economic growth realised that such growth had brought little benefit to lower income people.reduction One possible reason is that economic growth has been associated with an increase in income inequality. High income inequality is seen as detrimental to development since it reduces the benefits of economic growth to the poor.
Extensive poverty and growing income inequality have become major issues in the development process and their reduction has become the principal objective of most economic development policies. An important concern that arises from this is whether the poor have really benefited from economic growth and to what extent does the distribution of income affect the fight against poverty. This thesis attempts to address these developmental concerns by using data on the three main developing regions (South and East Asia, Latin America and sub- Saharan Africa) to empirically analyse and compare the effect of economic growth on poverty among the developing regions in the world. The thesis contributes to the debate on economic growth, income inequality and poverty by empirically presenting comprehensive regional analysis on income inequality, growth and poverty reduction.
We specifically analyse how different developing regions have experienced poverty reduction as a result of economic growth. We also examine and compare the impact of economic growth on income inequality among both developed and developing regions. This thesis focuses on South and East Asia, Latin America and sub-Saharan Africa which are the three main developing regions. We include developed countries, specifically the OECD region in this analysis because most of those countries have overcome the basic human development problems mentioned earlier.
These human problems are very important developmental issues because the economic dynamics may differ among countries and regions depending on factors such as the nature of economic growth, common heritage, international trade and regional integration. South and East Asia has been the best performers in terms of economic growth in economic.reduction recent years. The region contains the emerging giants of China and India that have contributed significantly to economic growth and poverty reduction in the developing world. Most countries in this region have been successful in transforming their economies from mainly agrarian to economies with significant industrial activities due to technological improvements in recent years.
In spite of these, mass poverty still remains in the region. Latin American countries are notable for their similar institutions and languages because of their common heritage. Countries in this region gained their independence long before most of the countries in Asia and sub-Saharan Africa. Despite having relatively lower levels of poverty, Latin America is historically the region with high income inequality.
Sub- Saharan African countries on the other hand have the highest concentration of poverty in the world. The countries in this region have no common colonial heritage compared to Latin American countries. The region is dominated by agrarian economies, hence exports in agricultural commodities and natural resources have been the main driver of economic growth in the region. After we investigate the growth effect on poverty levels and income inequality in the selected regions, we make a comparative analysis among them to determine which region has performed better in terms of achieving greater reduction in poverty levels and creating more equal distribution of income.2 Economic Growth and Income Equality One of the goals of economic growth is to promote economic development and poverty reduction.
However, the importance of the distribution of the benefit of economic growth has been widely acknowledged. In his classic work “Poverty, Inequality and Development”, Field (1980) linked income inequality with three types of economic growth. The first is modern-sector enlargement growth where economic.reduction the economy develops by enlarging the modern sector. Lewis (1954) classified the modern sector as industrialised sector that uses considerable amount of capital in production.
Examples include advance economies and to some extent Asian economies like China and Taiwan. This type of growth increases absolute incomes and reduces poverty levels. The effect of modern sector growth on income inequality in the initial stages depends upon whether the rich or the poor benefit from the increase in economic growth. As the modern sector expands, there is a redistribution of labor as workers move from the traditional sector (low income) into the modern sector (upper income), hence, reducing income inequality and poverty levels.
The second is modern-sector enrichment growth where growth is limited to certain groups of people in the modern sector with the traditional sector experiencing little or no growth. Though this type of growth causes average incomes to rise, it leads to worsening income inequality and little or no change in poverty levels. Latin American and sub-Saharan African countries have mostly experience this type of growth. Lastly, traditional sector enrichment growth occurs where aggregate incomes increases in the traditional (subsistent) sector, with little or no income increase in the modern sector.
Field (1980) explained that countries with this type of growth achieve reductions in absolute poverty even at very low incomes because they focus policies on poverty reduction. This type of growth leads to a more equal distribution of income and a significant reduction in poverty levels. The prospect for alleviating absolute poverty therefore depends on the rate of sustained economic growth and how its benefits are distributed in the society.
