chapter 6©e.wayne nafziger development economics chapter 6 poverty, malnutrition and income...

CHAPTER 6 ©E.Wayne Nafziger Development Economics

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 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).


$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).

chapter 6©e.wayne nafziger development economics chapter 6 poverty, malnutrition and income...

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day poverty

measures of poverty

poverty assessment

poverty lines

effect of poverty

poverty reduction

regional poverty

income inequality slide