Growth, Inequality, and Poverty Reduction in Developing Countries: Recent Global Evidence. By Augustin K. Fosu UN University-WIDER

Transcription

1 Growth, Inequality, and Poverty Reduction in Developing Countries: Recent Global Evidence By Augustin K. Fosu UN University-WIDER For Presentation at the OECD Global Development Outlook seminar, Shifting Wealth: The New Shape of the World Economy OECD Conference Centre Paris, France 15 March 2010

2 Introduction Outline Trends in Developing Countries Relative Growth GDP Growth vs. Poverty Reduction, by Region Poverty Trends, by Region and the Emerging Giants Poverty Transformation Vectors by Country Estimating the Income and Inequality Elasticities Distribution of Income and Inequality Elasticities Contributions to Poverty Reduction by Country: Income vs. Inequality Growth Illustrative Simulations Conlusion 2

3 Introduction Shifting wealth and development Poverty reduction as a dimension of development Poverty reduction by region and by country: recent evidence =? Roles of income and inequality by country =? Fosu@wider.unu.edu

4 Trend in Developing-Developed Countries GDP Growth Gap Data source: World Bank WDI Online 2009b

5 Per capita GDP growth versus poverty reduction by region

6 Poverty headcount ratio Trends in poverty (headcount ratio) by region, $1.25: $1.25 standard SSA SAS LAC EAP EECA MENA

7 Trends in poverty (headcount ratio), $1.25: China vs. India, poverty headcount ratio Poverty headcount ratio $1.25 standard China (Rural) China China (Urban) 2005 $1.25 standard India (Rural) India India (Urban)

8 poverty headcount ratio Trends in poverty (headcount ratio), $1.25: India vs. SAS and SSA, $1.25 standard India SSA SAS Fosu@wider.unu.edu

9 Trends in poverty (headcount ratio) by region, $2.50:

10 Poverty headcount ratio poverty headcount ratio Trends in poverty (headcount ratio), $2.50: China vs. India, $2.50 standard China (Rur al) China China (Ur ban) $2.50 standard India (Rural) India India (Urban)

11 poverty headcount ratio Trends in poverty (headcount ratio), $2.50: India vs. SAS and SSA, $2.50 standard India 84 SAS SSA

12 Poverty transformation efficiency, by country Country Efficiency Vector Country Efficiency Vector Albania (2, 8, 10, 9) Kyrgyz Rep. (5, 10, 9, 10) Argentina-Urb. (9, 9, 10, 10) Lao PDR (3, 6, 6, 7) Armenia (1, 10, 3, 9) Latvia (1, 1, 1, 1) Azerbaijan (1, 2, 1, 1) Lesotho (5, 10, 7, 9) Bangladesh (4, 8, 8, 8) Madagascar (9, 5, 8, 8) Belarus (2, 3, 2, 3) Malaysia (4, 9, 2, 5) Bolivia (8, 7, 10, 10) Mali (4,1, 5, 6) Brazil (8, 5, 4, 2) Mauritania (9, 5, 7, 4) Burkina Faso (4, 6, 6, 8) Mexico (8, 2, 2, 1) Burundi (10, 7, 8, 8) Moldova (4, 6, 4, 5) Cambodia (2, 5, 7, 6) Mongolia (3, 9, 9, 9) Cameroon (7, 1, 3, 3) Morocco (6, 8, 8, 7) CAR (10, 1, 6, 6) Mozambique (2, 4, 7, 7) Chile (3, 6, 3, 2) Nepal (7, 2, 6, 5) China-Rur. (1, 2, 4, 4) Nicaragua (5, 4, 4, 3) China-Urb. (1, 1, 3, 2) Niger (10, 4, 7, 7) Colombia (9, 7, 9, 9) Nigeria (7, 8, 8, 8) Costa Rica (6, 4, 2, 2) Pakistan (7, 3, 3, 4) Côte d'ivoire (10, 4, 9, 6) Panama (6,. 8, 6, 5) Djibouti (10, 10, 10, 10) Paraguay (10, 8, 4, 4) Dominican Rep. (3, 7, 7, 7) Peru (6, 5, 8, 6)

13 Poverty transformation efficiency, by country Country Efficiency Vector Country Efficiency Vector Ecuador (8, 2, 3, 2) Philippines (6, 6, 7, 5) Egypt (5, 6, 6, 3) Poland (2, 1, 1, 1) El Salvador (8, 5, 5, 3) Romania (4, 1, 2, 2) Estonia (1, 3, 1, 2) Russian Fed. (3, 8, 1, 1) Ethiopia (5, 7, 5, 7) Senegal (7, 5, 5, 5) Georgia (1, 10, 10, 10) South Africa (8, 9, 10, 9) Ghana (6, 3, 5, 4) Sri Lanka (3, 5, 6, 4) Guinea (8, 10, 10, 9) Swaziland (9, 2, 5, 6) Guinea-32.Bissau (10, 9, 8, 9) Tanzania (5, 10, 9, 8) Honduras (7, 3, 5, 3) Thailand (5, 6, 2, 3) India-Rur. (2, 7, 7, 7) Tunisia (3, 4, 1, 1) India-Urb. (2, 7, 8, 6) Turkey (4, 7, 9, 5) Indones-Rur. (7, 4, 4, 5) Uganda (3, 4, 6, 6) Indones-Urb. (7, 3, 3, 3) Ukraine (5, 3, 1, 1) Iran (4, 9, 9, 8) Uruguay-Urb. (8, 9, 2, 10) Jamaica (9, 2, 1, 3) Venezuela (10, 2, 2, 1) Jordan (6, 6, 3, 2) Vietnam (1, 1, 4, 4) Kazakhstan (2, 8, 4, 7) Yemen (6, 10, 10, 10) Kenya (9, 3, 5, 4) Zambia (9, 9, 9, 8)

14 Models and Estimation (1) p = b 1 + b 2 y + b 3 yg I + b 4 y(z/y) + b 5 g + b 6 gg I + b 7 g(z/y) + b 8 G I + b 9 Z/Y (2) E y = b 2 + b 3 G I + b 4 Z/Y (3) E g = b 5 + b 6 G I + b 7 Z/Y For $1.25 standard: (4) E y = G I Z/Y (5) E g = G I Z/Y Fosu@wider.unu.edu

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17 Explaining Poverty Growth: Countries experiencing poverty reduction, ($1.25 Headcount ratio) A B A+B Country Region Pov g E Y *dlny E G *dlng Pred Pov g Armenia EECA Azerbaijan EECA Belarus EECA Brazil LAC Burkina Faso SSA Burundi SSA Cambodia EAP Cameroon SSA CAR* SSA Chile LAC China-Rur. EAP China-Urb. EAP Costa Rica LAC Dominican Rep. LAC Ecuador LAC Egypt MENA El Salvador LAC Estonia EECA Ethiopia SSA

18 Countries experiencing poverty reduction ($1.25), continued Nepal SAS Ghana SSA Guinea* SSA Honduras LAC India-Rur. SAS India-Urb. SAS Indonesia-Rur. EAP Indonesia-Urb. EAP Jamaica LAC Jordan MENA Kazakhstan EECA Kenya SSA Lao PDR EAP Latvia EECA Lesotho* SSA Madagascar SSA Malaysia EAP Mali* SSA Mauritania SSA Mexico LAC Moldova EECA Mozambique SSA

19 Countries experiencing poverty reduction ($1.25) continued Nicaragua LAC Niger SSA Nigeria SSA Pakistan SAS Panama LAC Paraguay LAC Peru LAC Philippines EAP Poland EECA Romania EECA Russian Fed. EECA Senegal SSA Sri Lanka* SAS Swaziland* SSA Thailand EAP Tunisia MENA Uganda SSA Ukraine EECA Uruguay-Urb.* LAC Venezuela LAC Vietnam EAP Mean

20 Countries experiencing poverty increases ($1.25) A B A + B Country Region Pov g E Y *dlny E G *dlng Pred Pov g Albania EECA Argentina-Urb. LAC Bangladesh SAS Bolivia LAC Colombia* LAC Côte d'ivoire SSA Djibouti MENA Georgia EECA Guinea-Bissau SSA Iran* MENA Kyrgyz Rep. EECA Mongolia EAP Morocco MENA South Africa SSA Tanzania SSA Turkey* EECA Yemen EAP Zambia SSA Mean

21 Explaining Poverty Growth: Countries experiencing poverty reduction, ($2.50 Headcount ratio) A B A + B Country Region Pov g E Y *dlny E G *dlng Pred Pov g Azerbaijan EECA Brazil LAC Burkina Faso* SSA Burundi SSA Cambodia EAP Cameroon SSA CAR* SSA Chile LAC China-Rur. EAP China-Urb. EAP Costa Rica LAC Côte d'ivoire* SSA Dominican Rep. LAC Ecuador LAC Egypt MENA El Salvador LAC Estonia EECA Ethiopia SSA

22 Countries experiencing poverty reduction ($2.50), continued Ghana SSA Honduras LAC India-Rur. SAS India-Urb. SAS Indonesia-Rur. EAP Indonesia-Urb. EAP Jamaica LAC Jordan MENA Kazakhstan EECA Kenya SSA Lao PDR EAP Latvia EECA Malaysia EAP Mali* SSA Mauritania SSA Mexico LAC Moldova EECA Morocco MENA Mozambique SSA Nepal SAS

23 Countries experiencing poverty reduction ($2.50), continued Nicaragua LAC Niger SSA Nigeria SSA Pakistan SAS Panama LAC Paraguay LAC Peru LAC Philippines EAP Poland EECA Romania EECA Russian Fed. EECA Senegal SSA Sri Lanka SAS Swaziland* SSA Thailand EAP Tunisia MENA Turkey EECA Uganda SSA Ukraine EECA Venezuela LAC Vietnam EAP Mean

24 Countries experiencing poverty increases ($2.50) Country Region Pov g E Y *dlny E G *dlng Pred Pov g Albania EECA Argentina-Urb. LAC Armenia* EECA Bangladesh SAS Belarus* EECA Bolivia LAC Colombia* LAC Djibouti MENA Georgia EECA Guinea SSA Guinea-Bissau SSA Iran MENA Kyrgyz Rep. EECA Lesotho* SSA Madagascar* SSA Mongolia EAP South Africa SSA Tanzania SSA Uruguay-Urb. LAC Yemen EAP Zambia SSA Mean

25 Some Country Simulation Illustrations India: Linkage between GDP and Income Matters Scenario Link between GDP and Income Growth Contribution of Income Growth to Poverty Reduction Current Situation Weak (2.5% annually) <2.5% annually Simulation Strong (4.8% annually) >10.0% annually Bolivia: Rising Inequality Hurts Scenario Income Inequality Poverty Headcount Ratio ($1.25) Current Situation Rising by 2.2% annually Rise by 7.6% annually Simulation No rise Fall by 3.2% annually Russian Federation: Falling Inequality Helps Scenario Income Inequality Poverty Headcount Ratio ($2.50) Current Situation Falling (by 2.3% annually) Fall by 12.3% annually Simulation No fall Fall by only 1.1% annually

26 Burkina Faso vs. Chile: Low Income is a Bane; High Income is a Boon BURKINA FASO Income Inequality (Gini Coefficient) GDP growth Income Income Elast. Inequality Elast. Poverty Headcount Ratio ($1.25) Scenarios Current Situation % annually Lower Income Fall by 2.6% annually Simulation The same as Chile s Fall by 23.63% annually CHILE Current Situation % annually Higher Income Fall by 8.2% annually Fosu@wider.unu.edu

27 Broad Summary Major differences in regional trends in poverty Growth has mattered a great deal Indeed, on average, growth has been the main driver of poverty reduction globally BUT, there are major differences across countries The relationship between GDP and income has mattered Initial inequality has mattered Initial income has mattered (low-income ctrys need help!) Income growth has mattered Inequality changes have mattered One emerging giant has done great; the other not so great Fosu@wider.unu.edu

28 CONCLUSION Patience and Perseverance

29 Thank you! 29