POVERTY, INEQUALITY &

DEVELOPMENT
What Is Poverty?

 Poverty is a state or condition in which a person or community

lacks the financial resources and essentials for a minimum
standard of living. Poverty means that the income level from
employment is so low that basic human needs can't be met.
Economic growth is necessary, but not sufficient, to improve
the living standards of the whole population:

 If a country is too poor, even redistributing all income in order

to have perfectly egalitarian income distribution, everybody will
still be poor
 But a country may grow and income distribution may become so
unequal, that the number of people with low living standards
may actually increase.
Growth may be associated with worsening of the
income distribution when:

 The relatively well-off get most of the

benefits of increased income (“the richer, and
the poor get poorer”)
Growth may be associated with worsening of the
income distribution when:

 Government forces savings to further increase growth, thus

reducing consumption and welfare.
 Government uses increased income in projects that do not reflect
directly into benefits for citizens (several less developed
countries have well-armed military, nuclear weapons etc.)
What is Inequality?

 Inequality refers to the phenomenon of unequal and/or unjust

distribution of resources and opportunities among members of a
given society.
MEASURE OF INEQUALITY

 Inequality can be measured on how the average income of a

given country is distributed across its population
 To obtain a measure of inequality, we need information of
income for each single individual in the country, or for a
“sample’ of individuals.
Absolute Poverty

 We defined the extent of absolute poverty as the number as the

number of people who are unable to command sufficient
resources to satisfy basic need.
Measuring Poverty Gap

 Poverty and income inequality depend on type of

economic, political and institutional arrangements
according to which rising national incomes are
distributed among broad segments of a population.
MULTIDIMENSIONAL POVERTY

 Multidimensional Poverty tells a different story than

income poverty

 The results showed that knowing income poverty is

not enough if our concern is with multidimensional
poverty.