The Role of Inequality for Poverty Reduction

Bergstrom, Katy

World Bank, Washington, DC

关键词: MEAN INCOME;    HEADCOUNT;    POVERTY;    INEQUALITY;    POVERTY LINE;   

DOI  :  10.1596/1813-9450-9409
RP-ID  :  WPS9409

学科分类：社会科学、人文和艺术（综合）

来源: World Bank Open Knowledge Repository

【 摘 要 】

Using World Bank PovcalNet data from1974-2018 for 135 countries, this paper approximates theidentity that links growth in mean incomes and changes inthe distribution of relative incomes to reductions inabsolute poverty, and, in turn, examines the role of incomeinequality for poverty reduction. The analysis finds thatthe assumption that income is log-normally distributedallows one to approximate the identity well. Using thisapproximation, both the growth and inequality elasticitiesof poverty reduction are calculated. The inequalityelasticity of poverty reduction is larger, on average,compared to the (absolute) growth elasticity of povertyreduction. Moreover, the (absolute) growth elasticitydeclines steeply with a country's initial level ofinequality. However, despite these results, most of theobserved changes in poverty can be explained by changes inmean incomes. This is a consequence of changes in incomeinequality (as measured by percentage changes in thestandard deviation of log-income) being an order ofmagnitude smaller than changes in mean incomes. Overall, theresults highlight the important role income inequality canplay in reducing poverty even if prior poverty changes have,in large part, been a consequence of economic growth.