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Lecture 4: Poverty and Inequality
Terms in this set (35)
What is poverty?
Poverty is the lack of financial resources
What is consumption?
Increase in utility or happiness
Why do we need to define poverty?
To better implement development interventions, how to measure its dimensions, and the practical effects of choosing specific conceptualizations
Why does the national poverty line differ across the world?
They typically reflect a threshold below which a person's minimum nutrition, clothing and shelter needs cannot be met, consistent with the country's economic and social circumstances.
What is absolute poverty?
Amount of money needed to met minimum standard of nutrition, shelter and personal needs
What is relative poverty?
Focus on inequality and social exclusion; poverty when people fall below the prevailing standards of living deemed adequate in a particular country ('poverty threshold or poverty line')
What is structural poverty?
Long term and due to personal/social circumstances like lack of land or labour
What is conjunctural poverty?
Takes place during a time or crisis and are often caused by economic shocks or political instability
What is chronic poverty?
A phenomenon where a group is in a state of poverty over an extended time period
What is the Bhagwati hypothesis?
That economic growth is the primary route to the elimination of poverty ('trickle down effect')
Gains from FDI are likely to be far less or even negative under an import substitution (IS) regime compared to a policy regime geared to export promotion (EP) regime.
What is Paul Collier's argument?
Quantity not quality of growth
The key issue is lack of growth rather than the 'wrong type' of growth.
What are the four traps according to Paul Collier?
Conflict, natural resources, landlocked, bad governance
What are the six types of capital needed according Jeffrey Sachs?
1. Human capital (health, nutrition, skills)
2. Business capital (technology)
4. Natural capital
5. Public institutional capital
6. Knowledge capital
What does the poverty reduction require?
Net capital accumulation at rate that exceeds population growth
What does Sachs emphasises?
The need for differential diagnosis regarding the causes of poverty and factors that restrict economic growth in specific contexts
"The key to ending extreme poverty is to enable the poorest of the poor to get their foot on the ladder of development"
What is the Capabilities' approach of Amartya Sen?
Poverty is not only material poverty but is a deprivation of basic capabilities, of which low income is one factor.
Development should be understood as the expansion of freedoms people enjoy.
Influenced the HDI
What are the 5 key freedoms (Amartya Sen)?
Political, Economic Facilities, Social Opportunities, Transparency and Security
How do you measure poverty in a simple way?
Lack of money and income. No money = poor similar conception of development understood as growth and industrialisation.
What is a problem of simple poverty?
Whilst some may not have sufficient income, wearing shoes and occupying accommodations separate from their livestock have improved poor peoples' lives. Access to state services and the lack of voice in political decision-making further make the poor unable to articulate what they want for development
How do you measure poverty in a more complex way?
Deprivation of other factors: education, health, environmental quality, political and spiritual freedoms
Other factors constrain opportunities for the poor to improve their livelihoods. Political representation: agency, voice, and resistance as constitutive of RIGHTS (poor are typically the least organised) à induces forms of accountability from the state
How does Amartya Sen view poverty?
The deprivation of opportunities and choices to human development.
What is the experiential view in measuring poverty?
It has critique to IFI's treatment of poverty as an exercise of counting the poor
How do Goldin & Reinert measure poverty?
Income, health, education, empowerment, working conditions
• poor vs extremely poor
• life expectancy, infant and child mortality, etc;
• literacy rates, average years of schooling, enrolment rates, gender gap in access to education
• levels of political participation and access to institutions
• measures of workplace conditions that contribute to individual and social well-being
What is the difference in absolute and relative measures for poverty?
Absolute: headcount poverty, income poverty, etc.
Relative: in relation to broader society, e.g. lowest 20% of households ranked according to income
What is the difference between poor and extremely poor?
Poor: people living under 2$
Extremely poor: people living under 1.25$
What is HDI?
Composite Index measuring health, education and income (life expectancy at birth, adult literacy rate, school enrolment ratio, GDP/Capita
What is OPHI?
Oxford Poverty and Human Development Index, based on Sen's work
What are criteria (indicators) of OPHI?
1. Health - child mortality, nutrition
2. Education - years of schooling, child enrolment
3. Standard of living - electricity, drinking water, sanitation, flooring, cooking fuel, assets
When is a household multidimensionally poor?
If deprived in combination of indicators whose weighted exceeds 30% of deprivations
How do the indicators of OPHI work exactly?
1. Health (each indicator weighted equally at 1/6)
· Child Mortality: If any child has died in the family
· Nutrition: If any adult or child in the family is malnourished
2. Education (each indicator weighted equally at 1/6 )
· Years of Schooling If no household member has completed 5 years of schooling
· Child Enrolment If any school-aged child is out of school in years 1 to 8
3. Standard of Living (each of the six indicators weighted equally at 1/18)
· Electricity If household does not have electricity
· Drinking water If does not meet MDG definitions, or is more than 30 mins walk
· Sanitation If does not meet MDG definitions, or the toilet is shared
· Flooring If the floor is dirt, sand, or dung
· Cooking Fuel If they cook with wood, charcoal, or dung
· Assets If do not own more than one of: radio, tv, telephone, bike, motorbike
What is Engberg-Pedersen approach?
Remarkable progress on poverty reduction and social welfare failed to benefit the poorest in a substantial manner.
High levels of social inequality impede social stability and economic development.
Severe income disparities will be more disruptive in the coming decade
Globalisation and deeper integration has also facilitated global inequality
What dimensions of inequality exist?
2. Global social inequalities (disability, age, location, etc.), specific social inequalities (caste, ethnicity, social orientation)
3. Environmental inequalities
4. Political inequalities
5. Economic inequalities
6. Equality in opportunity
What is gini coefficient?
A statistical measure of income distribution.
It is often used as a gauge of economic inequality, measuring income distribution or, less commonly, wealth distribution among a population. The coefficient ranges from 0 (or 0%) to 1 (or 100%), with 0 representing perfect equality and 1 representing perfect inequality. Values over 1 are theoretically possible due to negative income or wealth.
What are critiques against the GINI coefficient?
If middle class increases, the Gini coefficient may indicate a reduced inequality even if the gap between the richest and poorest has not declined.
Income inequalities in two societies may produce the same Gini coefficient even if they are distributed differently.
The measure does not tell us what is fair, reasonable or useful level of inequality.
What is Palma Ratio?
Divide the income share of the top 10% by the income share of the bottom 40%.
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