POVERTY, INEQUALITY AND

GROWTH DEVELOPMENT
INTRODUCTION
Public action to combat hunger has to take note of the
causal links and of the gaps in those links”, Dreze and Sen
(1991, Hunger and Public Action).

Poverty at the individual

and/or household
level represents a serious constraint on
economic activity.

A lack of economic opportunities feeds into poverty.

These lack of opportunities can be reenforced

by income inequality.
Income inequality though represents one (very important) component of
economic inequality defined by Ray (1998, p.p170) as:

“…the fundamental disparity that permits one individual

certain material choices, while denying another individual
those very same choices.” (emphasis added).

What Ray is really saying is that those factors that determine

material choices are of importance here such household wealth,
income.
 Who are the poor?

How do we measure poverty?

What determines poverty?

How do we measure poverty?

Poverty can be both absolute and relative. See Martin Ravallion, (1994) Poverty
Comparisons.

Absolute Poverty:Those people who do not have

adequate nutritional intake per day, or do not have adequate
shelter or clothing in order to survive are deemed to be in absolute
poverty.

Is traditionally measured by introducing largely ad hoc poverty lines. E.g. the

World Bank reports the number of people in countries below a $1 or $2 a
day as a proportion of the total population.
Better but more expensive method is to calculate nutritionally based poverty lines
– World Health Organisation.
Absolute Poverty Lines
Poverty line measures signal to researchers where poverty is and becomes the
first place to start in analyzing poverty in a certain country, within a certain
economic group etc…..

Examples of Poverty Lines:

(1) $1 a day and $2 a day lines that the World Bank and United Nations Development Programme
(UNDP) use.

(2) Calories per capita or per household

Both measures are absolute in that people can be lifted out of poverty if they can
increase income or calories and poverty can be eradicated.
 Relative Poverty: The relative position of some
economic unit (e.g. individual, household, racial group) compared
to another economic unit.

A person can be relatively poor but not

absolutely poor – is really to do with distribution of
income in a country.
E.g. Economic growth will generally result in a reduction of absolute poverty but will only change relative poverty if there is a
change in distribution of income. (Woolard and Leibbrandt, 2001, pp. 47).
Relative Poverty Lines
Calculate a poverty line that is based on the income level of the population.
Relative poverty cannot be eradicated unless income
inequality is addressed.

(1) Standard percentage of people earnings below 50% of the median or

mean wage: can vary the 50% figure down to 10% or 25%.

Note: If income increases for all then relative poverty will still be apparent since you will always have
some who fall below 50% of the new (higher) median income level.
Generally, ad hoc shares of
Critique of Poverty LinesPoverty lines are static,
the average income per capturing a position of

1
person are taken to locate a poverty at a certain point in

4
poverty line. For example, time. However, it is highly
taking a poverty line as 50% likely that poverty is
of the mean/median income dynamic in nature with
level. people moving in and out
of poverty.

One weakness with such an

approach is that the number
of people in ‘poverty’ is
determined solely by where
the poverty line is placed
(Deaton, 1997). For a more realistic

2 3
Hence a number of poverty understanding of the
lines must be estimated to nature of poverty and who
give a clearer idea of what the poor are in a society
really is going on. Another the researcher must delve
weakness is that such much deeper.
poverty lines DO NOT
measure the depth of
poverty.
Poverty: A Different Methodology

human’ face
But poverty clearly has a more ‘ and one which
many economists often overlook or choose to skip over because it is
very hard to quantify. No surprise that the methodology used is then
qualitative in nature.

McKay (2002) refers to participatory investigations into poverty and

inequality which necessarily involves the researcher NOT sitting in
his/her ivory tower but actually living for a time in villages/
households and understanding the dynamics of these micro-economies.
The role of children in the family, of gender
differences, of who works for money income and
who does not, of access to any public services that
exist, of the dynamics of villages and tribes, of who
gets what when an elder dies…….the list is long and
interesting from a micro-economic perspective.
Who are the Poor?

The poor of any country share similar characteristics.

In developing countries the poor tend to be Black, female, young, rural,

unskilled and perhaps semi-skilled (this is determined by the nature of
economic growth, trade liberalization policy, subsidies etc…).

The factors that determine who is poor include socio-

economic institutions, e.g. Indian caste system, apartheid, racism
 Research indicates that the quality
and quantity of education, urban-rural
location, racial group, gender, health and employment status all impact on
whether somebody is poor or not.
Other factors include socio-economic factors, the historical legacy of a
customs, property rights, economic
country, social
dependence, political system/affiliations etc. This is where
much debate lies.

What Determines There is a large, positive

correlation between unemployment and
Poverty poverty. However the direction of causality is not straightforward

linkages
Indeed one of the problems in researching poverty and the

between poverty and the labour market is that an

endogeneity (happening at the same time) concern is raised immediately, i.e.
Does employment status determine poverty, or does poverty cause employment
status?

However the importance too of the history of the individual is vital in determining whether he/she is in poverty. Of
institutional structure of a country, social customs
particular importance here are the

and the household structure and dynamics.

How does individual poverty impact on the
individual’s participation in the labour
market
How does individual poverty impact on the individual’s participation in
the labour market?

Given poverty does exist in a country there are several ways this can impact on
participants’ behaviour in the labour market.

(1) Liebenstein (1963) first made the direct link between poverty in the form of being
under-nourished and productivity in the labour market. He found that if a person was
under-nourished then this impacted negatively on productivity and assuming a wage
labour market would mean a low wage, with MRP=W. Hence poverty can result in a
negative nutritional impact on the worker which can result in lower productivity.
• It is unclear what the minimal calorie intake is and what the appropriate
nutritional levels for workers should be in developing or indeed any
country.

• There is an issue here involving the type of job somebody has (is it highly
physical, and therefore requires far higher levels of foods) – see Strauss and
Thomas (1988).

• What is NOT beyond doubt is that poverty can result in a lack of food,
which can impact negatively on productivity and output that can be self-
perpetuating.
(2) Poverty can result in potential workers not being able to actively take part in the wage
labour market because (1) physically cannot go where the jobs are (2) the opportunity cost of
searching for work is too high (e.g. not able to subsistence farm and therefore could increase
the risk of hunger).

(3) Poverty within a household or within a community means less means by which to invest
in (1) human capital and (2) physical capital. This means little chance of escaping poverty
and indeed could result in a poverty trap emerging.

(4) Ray (1998, pp.273) postulates that access to food is the same as access to income and if
one of these factors is owned by an individual, he/she is likely NOT to be caught in a
poverty trap.

(5) As well as the physical side effects of being poor and lacking nutrition, there are also
negative mental impacts that are related to increasing the likelihood of depression, mental
apathy, and de-motivation.
What should be emerging for the reader is the causal duality of poverty and employment.

“Not only do labour markets generate income and therefore create the principal potential source
of nutrition and good health, but good nutrition in turn affects the capacity of the body to
perform tasks that generate income” Ray (1998, pp.274).

The nature of the labour market, in particular the level of unemployment, has a large impact on
the relationship between poverty and employment and hence the poverty trap.

If a country suffers from poverty and high unemployment (e.g. South Africa) then there is
massive ‘slack’ in the labour market, meaning demand is low and supply is high for (certain
kinds of?) labour.
Measuring Inequality and Poverty
• Measuring Inequality
• Size distributions (quintiles, deciles)
• Lorenz curves
• Gini coefficients and aggregate measures of inequality
• Functional distributions
Typical Size Distribution of Personal Income in a Developing Country by Income Shares—
Quintiles and Deciles
The Lorenz Curve
The Greater the Curvature of the Lorenz Line, the Greater the Relative
Degree of Inequality
Estimating the Gini Coefficient
Measuring Inequality and Poverty
• Measuring Absolute Poverty
• Headcount Index: H/N
• Where H is the number of persons who are poor and N is the total number of people
in the economy
• Total poverty gap:
H
TPG   (Yp  Yi )
i1

• Where Yp is the absolute poverty line; and Yi the income of the ith poor person


Measuring the Total Poverty Gap
• Measuring Absolute Poverty

• Average poverty gap (APG):

TPG
APG 
N

• Where N is number of persons in the economy

• TPG is total poverty gap
•Note: normalized poverty gap, NPG = APG/Yp
• Measuring Absolute Poverty
• Average income shortfall (AIS):
TPG
AIS 
H

• Where H is number of poor persons

• TPG is total poverty gap

• Note: Normalized income shortfall, NIS = AIS/Yp
• Measuring Absolute Poverty (continued)
• The Foster-Greer-Thorbecke (FGT) index:

1  Yp  Yi 
H
P    

N i 1  Yp 

• N is the number of persons, H is the number of poor persons, and α ≥0 is a

parameter
• When α=0, we get the headcount index measure
• When α=2, we get the “P2” measure
Measuring Absolute Poverty
The Newly Introduced Multidimensional Poverty Index

• Identification of poverty status through a dual cutoff:

• First, cutoff levels within each dimension (analogous to falling below a poverty
line for example $1.25 per day for income poverty);
• Second, cutoff in the number of dimensions in which a person must be deprived
(below a line) to be deemed multidimensionally poor.
• MPI focuses on deprivations in health, education, and standard of living; and
each receives equal (that is one-third of the overall total) weight.
 MPI Indicators
• Health - two indicators with equal weight - whether any child
has died in the family, and whether any adult or child in the family is
malnourished –weighted equally (each counts as one-sixth toward
the maximum deprivation in the MPI)
• Education - two indicators with equal weight - whether no
household member completed 5 years of schooling, and whether
any school-aged child is out of school for grades 1 through 8 (each
counts one-sixth toward the MPI).
• Standard of Living, equal weight on 6 deprivations (each
counts as 1/18 toward the maximum): lack of electricity;
insufficiently safe drinking water; inadequate sanitation; inadequate
flooring; unimproved cooking fuel; lack of more than one of 5 assets
– telephone, radio, TV, bicycle, and motorbike.
Interaction of the deprivations?
• Building the index from household measures up to the aggregate measure
(rather than using already-aggregated statistics), MPI approach takes
account of multiplied or interactive harm (complementarity) done when
multiple deprivations are experienced by the same individual or family
• The MPI approach assumes an individual’s lack of capability in one area
can only to a degree be made up by other capabilities – capabilities are
treated as substitutes up to a point but then as complements.
MPI Rankings and Poverty Headcounts for Selected
Countries
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.
• Multidimensionally, Bangladesh is substantially less poor - but
Pakistan substantially poorer - than would be predicted by income
poverty
• Ethiopia is far more multidimensionally poor, and Tanzania much
less so, than predicted by income poverty.
• Most Latin American countries e.g. Brazil rank worse on
multidimensional poverty than on income poverty; but Colombia’s
income and MPI poverty ranks are about same.
Poverty, Inequality, and Social Welfare
• What’s So Bad about Extreme Inequality?
• Dualistic Development and Shifting Lorenz Curves: Some
Stylized Typologies
• Traditional sector enrichment
• Modern sector enrichment
• Modern sector enlargement
Improved Income Distribution under the Traditional-Sector
Enrichment Growth Typology
Worsened Income Distribution under the Modern-Sector Enrichment
Growth Typology
Crossing Lorenz Curves in the Modern-Sector Enlargement Growth
Typology
Poverty, Inequality, and Social Welfare
• Kuznets’ Inverted-U Hypothesis

Kuznets' Inverted U-hypothesis, as per capita national income of a

country increases, in the initial stages of growth, inequality in income
distribution rises and after reaching the highest degree in the
intermediate level the income inequality falls
Selected Income Distribution Estimates
Income and Inequality in Selected Countries
Kuznets Curve with Latin American Countries Identified
Absolute Poverty: Extent and Magnitude
• Progress on Extreme Poverty
• Clear progress on $1.25-a-day headcount
• Less clear progress on $2.00-per-day headcount (see Figure 5.14)
• Incidence of extreme poverty is uneven
• Relationship between Growth and Poverty
• Association between growth and poverty reduction
• When it is inclusive, growth reduces poverty
• Lower extreme poverty may also lead to higher growth
Global and Regional Poverty Trends
Regional Poverty Incidence, 2005
Poverty Incidence in Selected Countries
Economic Characteristics of High-Poverty
Groups
• Rural poverty
• Women and poverty
• Ethnic minorities, indigenous populations, and poverty
Poverty: Rural versus Urban
Indigenous Poverty in Latin America
MALAYSIAN POVERTY
CURRENT SITUATION
 Policy Options on Income Inequality and Poverty: Some Basic Considerations

Areas of Intervention
Altering the functional distribution Policies to correct factor price
distortions
Mitigating the size distribution
Policies to change the distribution
Moderating (reducing) the size of assets, power, and access to
distribution at upper levels education and associated
employment opportunities
Moderating (increasing) the size
distribution at lower levels Policies of progressive taxation and
directed transfer payments
Policy options
Policies designed to build
Changing relative factor prices
capabilities and human and social
capital of the poor
Progressive redistribution of asset
ownership
Progressive taxation

Transfer payments and public

provision of goods and services
Population and
Development
Size of Population
• Congestion- assessing population pressure on resources

• Adequate- labor resources and human capital

• Strong local market development and potential

 Distribution of Population
• Population is rarely distributed evenly in any region or state –
Why?
• Population reflects resource base, soil fertility and the urban pattern
• Mountainous terrain or severe slope repels population
• River valleys often draw high density of population as result of
alluvial deposits and accessibility
• Historical factors also explain the unevenness of population
distributions
 Growth and Mobility of Population
Measured in two ways:

• Natural Change- excess of births over deaths where dramatic decreases in

mortality and continued high fertility produce high rates of growth Example: Niger-
3.5% per annum

• Population Movement- such movement whether from outside

region/nation or inside affects both sending and receiving areas
a. Movements may be permanent (Migration)
b. Movements may be temporary (Commuting or Circulation)
c. Forced movements- refugees fleeing military-political conflict or natural disasters-
examples?
Structure of Population
• Refers to the Age and Sex Composition of a Population and is
diagnosed with an Age-Sex Pyramid
• Structure of Population has important implications for
labor force size and productivity and raises
as well the issue of the dependency burden
 Population Concepts
Over-population
exists whenever a reduction in the
population size would enable a
smaller population to earn a better
living Symptoms: famine and out
Under-population migration
where people are so few that
they cannot develop their
resources effectively to better
their conditions of life

Carrying capacity
population that can be supported by
available resources
 Measures of Population
Population density
how much land in relation to population: Two types of density

Physiological or Nutritional Density-

number of persons/ cultivated area—

more realistic
Example: Japan 15 percent of land is
cultivated Man-land or Arithmetic Density
Arithmetic density- 600 per sq mi
Physiological density- 4,000 per sq mi number of persons/ area—often
unrealistic because it assumes an
even distribution of people
IDEA www.yourwebsite.com
 Measures of Population
• Crude birth rate- Number of live births per 1K population
• Fertility ratio- Number of children < 5 years per 1K women of child
bearing age (15-44)
•Crude death rate- Number of deaths per 1K population
• Infant mortality rate- Number of deaths 0-1 years/ Per 1K
live births
• Dependency Ratio- Young (< 15 years) + Aged (> 65 years)/
Adult (15- 64 years)
Migration and Urbanization
Migration Issues
• 1. Types of Migration
• What are the major forms of migration?
• 2. Selective Migration
• Why migration can be considered as a selective process?
• 3. Brain Drain
• What is the extent of movements of skilled labor?
Types of Migration
• Emigration and immigration
• Change in residence.
A Problems or • Relative to origin and
benefits? destination.

Emigrant • Requires information

• People and conditions.
• Two different places.
• Two different times.
• Duration
Immigrant • Permanent.
• Seasonal / Temporary.
Problems or
B benefits? • Choice / constraint
• Improve one’s life.
• Leave inconvenient / threatening
conditions.
Types of human migration include:

•internal migration: moving within a state, country, or continent

•external migration: moving to a different state, country, or continent

•emigration: leaving one country to move to another

•immigration: moving into a new country

•return migration: moving back to where you came from

•seasonal migration: moving with each season or in response to labor or

climate conditions
People who migrate fall into several categories:

•An emigrant is a person who is leaving one country to live in another.

•An immigrant is a person who is entering a country from another to make a new home.

•A refugee is a person who has moved to a new country because of a problem in their former home.
Why do people move? What forces do you think drive human migration? 
People move for many reasons and that those reasons are called push factors and pull factors.

Push factors include leaving a place because of a problem, such as a food shortage, war, or flood.

Pull factors include moving to a place because of something good, such as a nicer climate, more job
opportunities, or a better food supply.

What effect does a region’s economy, climate, politics, and culture have on migration to and from the area? 
Types of Migration
• Gross migration
Gross migration
• Total number of people coming
in and out of an area.
• Level of population turnover.
Immigration
• Net Migration
Emigration
• Difference between
immigration (in-migration) and
emigration (out-migration).
• Positive value:
• More people coming in.
• Population growth.
• 44% of North America and 88%
of Europe.
• Negative value:
• More people coming out.
Net migration • Population decline.
Types of Migration
• International Migration
• Emigration is an indicator of economic and/or social failures of a society.
• Crossing of a national boundary.
• Easier to control and monitor.
• Laws to control / inhibit these movements.
• Between 2 million and 3 million people emigrate each year.
• Between 1965 and 2000, 175 million people have migrated:
• 3% of the global population.
Migration Policies and Global Migration Patterns
Period Policies Pattern
Before 1914 Open policies (“showing up”). From developed (Europe) to developing
Immigration as a source of labor and countries (Americas, Africa, Australia).
development. Immigration from Europe between 1880
and 1910 was exceeded 25 million.
1920s and “Closed door” linked with the Limited migration.
1930s economic depression. Deportation of
immigrants.

After 1945 More open policies. Reconstruction Beginning to shift from developing to
in Europe (12% of labor force) and developed countries (12%).
economic growth in America.

After 1973 Relatively open policies, but with From developing to developed countries
more stringent requirements. Growth (88%). 3 million illegal immigrants
of refugees and illegal immigration. entering the US per year.
World Migration Routes Since 1700

European
African (slaves)
Indian
Chinese
Japanese Majority of population descended from immigrants
Total Slave Population, United States (1790-1860)

1790 1800 1810 1820 1830 1840 1850 1860

Major International Migration Patterns,
1990s

NA
Negative net migration
Positive net migration
International Migration: Main Destination
Countries, 1997
Immigration, 1997
0 100,000 200,000 300,000 400,000 500,000 600,000 700,000 800,000

France

Canada

Britain % Foreign population

Immigration, 1997
Japan

Germany

United States

0 2 4 6 8 10 12 14 16 18
% of foreign population
 Immigration to the United States, 1820-2003 Latin America
Asia
Southeast
1,400,000 Europe

1,200,000

1,000,000 Germany
Scandinavia

800,000

British
600,000 Isles

400,000

200,000

0
Types of Migration
• Internal Migration
• Within one country.
• Crossing domestic jurisdictional
boundaries.
• Movements between states or provinces.
• Little government control.
• Factors:
• Employment-based.
• Retirement-based.
• Education-based.
• Civil conflicts (internally displaced
population).
Types of Migration
• Local Migration
• No state boundaries are crossed.
• Buying a new house in the same town
or city.
• Difficult to research since they are
usually missed in census data.
Central City • Based on change of income or lifestyle.
• Often very high levels of local
migration.
Suburb • Americans change residence every 5 to
7 years.
Types of Migration
• Voluntary migration
• The migrant makes the decision to move.
• Most migration is voluntary.
• Involuntary
• Forced migration in which the mover has no role in the decision-making process.
• Slavery:
• About 11 million African slaves were brought to the Americas between 1519 and 1867.
• In 1860, there were close to 4 million slaves in the United States.
• Refugees.
• Military conscription.
• Children of migrants.
• Situations of divorce or separation.
Types of Migration
Type Characteristics

International Crossing a boundary; easier to control; regulated;

difference in income; 2-3 million per year.
National Between states or provinces; little control; employment
opportunities; education; retirement.
Local Within a city/region; change of income or lifestyle.

Voluntary The outcome of a choice.

Involuntary The outcome of a constraint.

Selective Migration
• Context
• Many migrations are selective.
• Do not represent a cross section of the source population.
• Differences:
• Age.
• Sex.
• Level of education.
• Age-specific migrations
• One age group is dominant in a particular migration.
• International migration tends to involve younger people.
• The dominant group is between 25 and 45.
• Studies and retirement are also age-specific migrations.
Selective Migration
• Sex-specific migrations
• Males:
• Often dominant international migrations.
• Once established, try to bring in a wife.
• Females:
• Often dominate rural to urban migrations.
• Find jobs as domestic help or in new factories.
• Send remittances back home.
• Filipino females 17-30 to Hong Kong and Japan.
• “Mail-order bride”:
• 100,000 – 150,000 women a year advertise themselves for marriage.
• About 10,000 available on the Internet at any time.
• Mainly from Southeast Asia and Russia.
• Come from places in which jobs and educational opportunities for women are scarce and wages are low.
Selective Migration
• Education-specific migrations
• May characterize some migrations (having or lacking of).
• High level of education attained by most contemporary Asian immigrants to the USA and
Canada.
• Educational differences:
• 21% of all legal immigrants have at least 17 years of education.
• 8% for native-born Americans.
• 20% of all immigrants do not have 9 years of schooling.
• Foreign students:
• Often do not return to their home countries after their education.
• Often cannot utilize what they have learned.
• Since 1978 some 130,000 Chinese overseas students have returned while some 250,000 have remained
abroad.
• Most research-oriented graduate institutions have around 40% foreign students.
Selective Migration
• Immigration and jobs
• Related to the economic sector.
• High level:
• Filling high skilled position in science, technology and education.
• Not enough highly trained personnel in the US.
• Result in recruiting abroad (see brain drain).
• Low level:
• Filling low paid jobs (minimum wage) that most people do not want (agriculture and low
level services).
• Maintain low wages in low skilled jobs.
• Possibility of an informal economy.
Brain Drain
• The brain drain problem refers to the situation where a country loses
its best workers.

• For example, skilled workers in developing countries such as India or

Pakistan may be attracted by better rates of pay and working
conditions in developed countries, such as the US and Western
Europe.
Brain Drain
• Definition
• Relates to educationally specific selective migrations.
• Some countries are losing the most educated segment of their population.
• Can be both a benefit for the receiving country and a problem to the country of
origin.
• Receiving country
• Getting highly qualified labor contributing to the economy right away.
• Promotes economic growth in strategic sectors: science and technology.
• Not having to pay education and health costs.
• 30% of Mexicans with a PhD are in the US.
Brain Drain
• Country of origin
• Education and health costs not paid back.
• Losing potential leaders and talent:
• Between 15 and 40% of a graduating class in Canada will move to the US.
• Long term impact on economic growth.
• Possibility of remittances.
• Many brain drain migrants have skills which they can’t use at home:
• The resources and technology may not be available there.
• The specific labor market is not big enough.
• May eventually come back with skills and connections:
• Korea, Taiwan, China and India.
Brain drain

also known as human capital flight, is a serious issue in many parts of the world, as skilled
professionals seek out work abroad rather than returning to work in their home country.

Many are driven away by high unemployment, but issues like political oppression, lack of
religious freedom and simply not being able to earn a big enough paycheck also play a
significant role in exacerbating brain drain. 

Ethiopia: Ethiopia produces a large number of qualified professionals, especially in the

medical field, but is experiencing one of the worst brain drains of any country in the world.

Nigeria: Nigeria is another African nation that has suffered due to a massive brain drain. With
much of Nigeria still essentially a developing nation with unreliable power and few resources,
higher level science, engineering and medical professionals often find little to motivate them
into staying, especially with job offers from the U.S. and European nations exerting a powerful
pull. 
Kenya: High unemployment rates, lack of resources and other factors have made Kenya one
of the top brain drain countries in Africa. With fewer than 30% of Kenyans who study
overseas returning to work in Kenya, the nation is feeling the hurt of losing so many skilled
professionals.

South Africa: Years of unrest, high crime rates, AIDS and lack of jobs have combined to
make South Africa’s brain drain a serious problem. Over the past three years, the country
has lost over 100,000 workers, with an additional 70% of skilled South Africans saying they
are considering leaving the nation. Losing so many skilled workers has a ripple effect,
with the loss of each skilled professional costing about 10 unskilled jobs.

Iran: In 2006, the IMF ranked Iran the highest in brain drain among 90 countries (both
developed and less developed), with over 180,000 people leaving each year due to a poor job
market and oppressive social conditions. In fact, it is estimated that over 25% of Iranians
with post-secondary degrees live and work abroad, adding up to a total of 4 million Iranians 
living overseas.
Migration Theory
• 1. Push - Pull Theory
• What are the major “push” and “pull” factors behind migration?
• 2. Economic Approaches
• How can migration be explained from an economic perspective?
• 3. Behavioral Explanations to Migration
• How can migration be explained from a human behavior perspective?
Push - Pull Theory
• Context
• Migrations as the response of individual decision-makers.
• Negative or push factors in his current area of residence:
• High unemployment and little opportunity.
• Great poverty.
• High crime.
• Repression or a recent disaster (e.g., drought or earthquake).
• Positive or pull factors in the potential destination:
• High job availability and higher wages.
• More exciting lifestyle.
• Political freedom, greater safety and security, etc.
Push - Pull Theory
• Intervening obstacles
• Migration costs / transportation.
• Immigration laws and policies of the destination country.
• The problem of perception
• Assumes rational behavior on the part of the migrant:
• Not necessarily true since a migrant cannot be truly informed.
• The key word is perception of the pull factors.
• Information is never complete.
• Decisions are made based upon perceptions of reality at the destination relative to the known
reality at the source.
• When the migrant’s information is highly inaccurate, a return migration may be
one possible outcome.
Push - Pull Theory

Intervening obstacles

Origin Destination

Positive factors
Neutral factors
Negative factors
Push-Pull Factors for Chinese Students
Deciding to Say in the United States, 1997
Chinese Push Factors US Pull Factors
13%
19% 16% 11%
28%
3%
7% 1%
8% 20%

14%
11%
13%
Political instability
Lack of academic freedom
Improve learning
Lower standards of living
Complicated human relations
Crowding and pollution
Other
36%
Academic freedom
Job opportunities
High standards of living
Work environment
Learning and information
Simpler human relations
Other
Push-Pull Factors for Chinese Students
Deciding to Return to China, 1997
Chinese Pull Factors US Push Factors
8% 9% 6%
6% 21%
30% 2%
9%
9%

11%
24%
11% 29%
25%

Higher social status Stress

Better work opportunities Lack of job security
Patriotism Violence and crime
Family Racism
Cultural factors Loneliness
Reform China No choice
Other Other
Economic Approaches
• Labor mobility
• The primary issue behind migration.
Labor shortages • Notably the case at the national level.
High wages • Equilibrate the geographical differences
in labor supply and demand.
• Accelerated with the globalization of the
economy.
Migration • Remittances
• Capital sent by workers working abroad
to their family / relatives at home.
• $62 billion in 1999:
Surplus labor • $16 billion each year goes out of Saudi
Low wages Arabia as remittances.
• 2nd most important most important source
of income for Mexico (after oil and
before tourism); 16.6 billion in 2004.
Behavioral Explanations of Migration
• Life-cycle factors
Stay with parents
• Migration linked to events in one’s life.
Move to college • People in their 30s are the most mobile.
25 First job • Education, career, and family are being
established.
Marriage
• Later in life, flexibility decreases and
Promotion inertia increases.
50 • Retirement often brings a major change.
• Large migrations of retired people have
Children leave home
been occurring in the direction of
Retirement amenities-oriented areas.
75

Loss of mobility
Behavioral Explanations of Migration
• Migrants as risk-takers
• Why, among a population in the same environment (the same push factors), some
leave and some stay?
• Migrants tend to be greater risk-takers, more motivated, more innovative and more
adaptable.
• Non-migrants tend to be more cautious and conservative.
• Can be used to explain the relative dynamism in some societies, like the USA since
the 1800s.
• Summary
• No one theory of migration can adequately explain this huge worldwide
phenomenon.
• Each brings a contribution to the understanding of why people move.
Refugees
• 1. Definition
• What is a refugee and how one qualifies for this status?
• 2. Contemporary Evolution
• How the refugee situation has evolved in time?
Definition
• The United Nations definition
• The 1951 Convention Regarding the Status of Refugees and the 1967 Protocol
on the Status of Refugees:
• “..... any person who, owing to a well-founded fear of being persecuted for any
reasons of race, religion, nationality, member of a particular social group or political
opinion, is outside the country of his nationality, and is unable or, owing to such fear,
is unwilling to avail himself of the protection of that country.…” .
• The problem lies in the definition of who is a refugee.
• There are no international agreements to protect people who cross boundaries
for their economic survival.
• Refugees are people who have fled war, violence, conflict or
persecution and have crossed an international border to find safety
in another country.

• They often have had to flee with little more than the clothes on their
back, leaving behind homes, possessions, jobs and loved ones.
• “someone who is unable or unwilling to return to their country of
origin owing to a well-founded fear of being persecuted for reasons of
race, religion, nationality, membership of a particular social group, or
political opinion.”
• By the end of 2017, there were 25.4 million refugee men, women and
children registered across the world. 
Definition
• Conditions to qualify for refugee status
• Political persecution must be demonstrated.
• An international boundary must be crossed:
• Domestically displaced persons do not qualify.
• Protection by one’s government is not seen an alternative:
• The government may be the persecutor.
• Could be incapable of protecting its citizens from persecution.
Definition
• Environmental and economic refugees
• People who can no longer gain a secure livelihood in their homelands because of
what are primarily environmental or economic factors of unusual scope.
• Sources:
• Natural disaster.
• Human alterations to the environment; climate change.
• Contamination (pollution) of the environment.
• Lack of development and opportunities.
• Render continued residence in that particular location unsustainable.
• Mozambique, February 2000:
• Floods made 1 million people homeless.
• Destroyed agricultural land and cattle.
Contemporary Evolution
• Origins
• The first recorded refugees were the Protestant Huguenots who left France to avoid
religious persecution.
• About 200,000 at the end of the 17th century.
• Went to England, Germany, the Netherlands, Switzerland, and the English colonies in
North America.
• Pre-WW II and during WW II
• Primarily political elites:
• Fleeing repression from the new government, which overthrew them.
• Usually small in number and often had substantial resources available to them.
• War-driven refugees:
• About 12% of the European population displaced.
• Usually could be expected to repatriate after the war ended.
Contemporary Evolution
• Post WW II
• Change in the patterns of refugee flows:
• The majority of refugees are now coming from the developing world.
• De-colonization in Asia, Africa, and the Caribbean:
• Political unrest in many newly independent states.
• Multi-ethnic nature of those states.
• The result of the drawing of colonial boundary lines by Europeans.
• The Cold War also increased political instability in a number of countries.
• Political instability in Latin America increased due to the vast social inequalities
existing in that region.
• New kind of refugee flow:
• Large and of long (or permanent) duration.
Contemporary Evolution
• Current issues
• Refugees are a controversial issue:
• Especially in the developed world.
• Only a small share of the asylum seekers are granted the refugee status.
• Less than 20% for the European Union.
• Increasingly, refugees are no longer accepted.
• Economic refugees resorting to asylum as the only way to get a legal status.
• 1996 amendment to US immigration law:
• Enforcing detention for all refugees entering the United States.
• INS can summarily deport those who arrive without valid travel documents.
• 4,000 detained on any given day.
Refugees per Continent, 1981-2003
30
Europe
Africa
25
Asia
To tal
20

15

10

0
Origins and Destinations of Refugees, 2003

10,000
100,000

1,000,000

Red = Origin
Green = Destination
 Main Asylum Countries and Internally Displaced
Population, 2001
Colombia
To tal
Internally displaced
Yu g oslavia, FR Refug ees

United States

Germany

Russian Federatio n

Afghanistan

Iran

Pakistan

0 500,000 1,000,000 1,500,000 2,000,000 2,500,000

Urbanization
• 1. Context and Issues
• What is urbanization and what are its causes?
• 2. Why People Move to Urban Areas?
• 3. Megacities and Urban Regions
• What is the current state of global urbanization?
• 4. Shantytowns
• What characterizes the prevailing urban environment?
Context and Issues
Population growth
• What is urbanization?
• Urbanization is the agglomeration of
(Natural increase or
population in cities:
migration)
• Growth of the proportion of the
population living in cities.
• Demographic process:
• Urban population growth (natural
increase or migration).
• Infrastructure process:
• Expansion of urban infrastructures and
land use.
• Economic process:
• Creation of secondary, tertiary and
quaternary sectors.
• Creates a society where values and
lifestyles are urban.
Urban expansion
Context and Issues
• Causes of urbanization
• Historical:
• Defense.
• Trade routes.
• Social:
• Increased social interactions.
• Institutions representing a society (government, religion & education).
• Economic:
• Linked with agricultural surpluses.
• Increased economic opportunities.
• Access to labor.
• Specialization.
• Economies of scale and of agglomeration.
Context and Issues
• The urban explosion
• Urban population growth is the most important change in population
geography.
• About 50% of the global population, 3 billions, lives in cities.
• Almost all the population growth between 2000 and 2030 will occur in cities.
• By 2050, 6.2 billion people will live in cities, more than the current (2000)
population.
• Much of this growth will come in the world’s poorest countries.
Context and Issues
• Developed countries
• Developed countries are already urbanized.
• Passed through the rural - urban migration process.
• Concurrent with demographic transition and industrialization.
• Developing countries
• Going through a major phase of urbanization.
• Urbanization mainly occurs in developing countries:
• Will account for 93% of the 2 billion increase in the global urban population between
2000 and 2030.
• Latin America and East Asia is farthest along.
• The rest of Asia is a little further behind.
• Africa is urbanizing more slowly than the other world regions.
Stages of Urbanization
Initial Stage Transition Stage Terminal Stage

100 Demographic transition

Rural to urban migration

Developed countries
80
Urban Population

Rural Developing Urban

60 countries
Society Society
40
Least developed
countries
20
Urbanization
0
Time
Percentage of Population Urban, 2000

Less than 25%

25% to 50%
50% to 75%
More than 75%
NA
 % of Urban Population, 1950-2030
Asia

Latin Am erica

North America

Europe
2030
Africa 2000
1975
World 1950

0 10 20 30 40 50 60 70 80 90
 Urban Population, 1950-2030 (in millions)
Asia

Latin America

North America

Europe 2030
2000
Africa 1975
1950

0 500 1000 1500 2000 2500 3000

Why People Move to Urban Areas?
• Context
• 50 million new urbanites each year.
• 1 million new urbanites each week.
• About 155,000 new urbanites each day.
• About 75,000 rural poor migrate to cities each day.
• Major changes in the developing world.
• Migration:
• Makes a significant contribution to the growth of urban areas.
• Accounts for between 40% and 60% of annual urban population growth in the developing
world.
• Huge rural-to-urban migration potential in areas having a large rural population.
Why People Move to Urban Areas?
• Push-Pull considerations
• Both are affecting rural-urban migrations.
• “Pull” of the cities may determine the destination.
• Migrants are pulled toward cities:
• Prospect of jobs and higher incomes.
• Most early urbanization was the result of pull considerations.
• Pushed out of rural areas:
• “Push” factors predominate as the motivation to move.
• Poverty, lack of land, declining agricultural work, war, and famine.
• Play more importance today than push considerations.
Push - Pull Factors for Urbanization in the Third World

PUSH Rural PULL Urban

Instability
Rural structures Employment market
Low employment Better services
Demographic pressure Low barriers
Modernity

Migration
18-35
Why People Move to Urban Areas?
Factor Condition Issues

Instability / Disasters / Push Creation of refugees. Cities as safe heavens.

Wars / Famines

Expectation of jobs Pull Higher wages but higher living costs. Large labor
markets. Informal sector dominant.

Deterioration of rural Push Demographic growth. Land tenure (landless

life peasants). Mechanization (surplus labor).

Transportation Intervening Increased mobility. Lower costs. Construction of

opportunities roads and rails. Access to rural markets.

More and better Pull Better schools and health services. Access to
services water and electricity. Overcrowding and pollution.
 % of the Population Having Access to Public
Infrastructure in Developing Countries, 1990

Rural areas
Urban areas
Sewers

Aqueduc

Electricity

0 10 20 30 40 50 60 70 80 90
Why People Move to Urban Areas?
• Urbanization and economic survival
• Decision to move to an urban area:
• Part of a complex survival strategy.
• Families minimize risk by placing members in different labor markets.
• Largest labor market maximizing the chances of employment and survival.
• Cities are the largest labor markets.
• Favelas (squatter settlements) of Rio de Janeiro:
• Cannot be understood without reference to the latifundia land system in rural Brazil.
• Characterized by large landholdings owned by a limited elite.
• Peasants as contract labor with no ownership.
Megacities and Urban Regions
• Concentration
• An increasing share of the global population lives in megacities:
• Megacities (over one million).
• Supercities (over 4 million).
• Supergiants (over 10 million).
• First modern megacity, Beijing 1770.
• 1900:
• 233 million urbanites (14% of the global population); 20 megacities.
• 1950:
• 83 megacities.
• 34 cities in developing countries.
• 2000:
• 3 billion urbanites (50%); 433 megacities.
• All new millionaire cities are in developing countries.
• 11 of the 15 largest cities are in developing countries.
Number of Cities with Populations of 5 Million or
More, 1950-2000
50

45 More than 10 millions

5-10 millions
40

35

30

25

20

15

10

0
1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000
Cities of more than 8 million, 1950-2000
1950 1970 1990 2000
Developed countries
New York New York Tokyo Tokyo
London London New York New York
Tokyo Los Angeles Los Angeles
Los Angeles Moscow Moscow
Paris Osaka Osaka
Paris Paris
Developing countries
None Shanghai Mexico City Mexico City
Mexico City Sao Paulo Sao Paulo
Buenos Aires Shanghai Shanghai
Beijing Calcutta Calcutta
Bombay
Sao Paulo Buenos Aires
Beijing
Bombay Jakarta
Seoul Delhi
Beijing Buenos Aires
Rio de Janeiro Lagos
Tianjin Tianjin
Jakarta Seoul
Cairo Rio de Janeiro
Delhi Dhaka
Manila Cairo
Manila
Karachi
Bangkok
Istanbul
Teheran
Bangalore
Lima
Cities with more than 5 Million People, 2000

Saint Petersburg
Moscow
London
Paris
Chicago Essen Istanbul Beijing Tianjin Seoul
Los Angeles New York
Lahore Osaka
Cairo Delhi Chongqing Wuhan
Karachi Calcutta Shanghai
Mexico City Santiago Hyderabad
Bangalore Madras Bangkok
Santiago Lagos

Kinshasa Jakarta
Lima

Rio de Janeiro

Santiago
Buenos Aires
 The 15 Largest cities in the world, 2000-2015
Million s
0 5 10 15 20 25 30

To kyo

Bombay

Dhaka

São Paul o

Delhi

Mexico City

New Yo rk

Calcutta

Karachi

Lagos

Los Angel es

Shanghai

Metro Mani la
2015
Bei jing
2000
Cairo
Shantytowns
• Context
• Many of the new urban dwellers, particularly women and their children, are among the
poorest people in the world.
• Difficulty to access housing:
• Economic costs.
• Availability.
• 100 million people are homeless.
• 928 million live in precarious housing conditions (slums).
• Shantytowns; informal habitat or squatter housing:
• Favelas (Brazil).
• Pueblos jovenes (Young towns).
• Asentamiento irregulares (Irregular settlements).
• Villas miserias (Miserable villages, Argentina).
• Jughi Jopri (India).
Shantytowns
• Definition
• Dwellings are built by the current or original occupant:
• Rudimentary construction materials.
• Did not receive a construction permit.
• Do not follow norms in terms of housing and sanitation.
• Inhabitants have no legal title to the land:
• Most are located in areas being declared inhabitable.
• Own by the municipality.
• Abandoned private land.
• Exploiting a legal vacuum of land ownership.
• Lack of urban services:
• Generally not serviced by public utilities such as tap water, electricity, roads, public
transportation and sewage.
Shantytowns
• Setting
• Shantytowns are constructed
over the least desirable land.
Disamenity Disamenity
• Put the population at risk.
• Caracas, Venezuela, 1999:
CBD
• Mudslides killed 50,000
inhabitants.
• Created 400,000 homeless.
• 500,000 of the 6 million
inhabitants were considered
at high risk.
Commercial/Industrial
• Bhopal, India, 1984:
Elite Residential Sector • Union Carbide release of
Zone of Maturity
toxic cocktail.
• 500,000 people exposed.
Zone in Situ Accretion
• 16,000 deaths.
Zone of peripheral
squatter settlements
Shantytowns
• Habitat
• Informal settlements:
• Perhaps the most visible sign of widespread poverty.
• About 25% of the surface of cities in developing countries is covered by shantytowns.
• 30-60% of the urban population.
• Emerged in all Third World cities:
• Following the demographic explosion.
• Now the norm more than the exception.
• Incapacity of private and public instances:
• Provide low price housing for the majority of the population.
• The State more concerned about providing housing for its public servants and its middle class.
• Housing crisis that could not be solved.
Shantytowns
• Growth process
• People expelled from gentrification in downtown areas.
• Inflow of people expelled from poverty in rural areas.
• In several cases, rightful owners of land have divided it in small lots and sold it in
order to have a higher profit.
• In some instances, land was illegally sold to dwellers being framed.
• Is there any hope?
• Housing has always been a priority for investment.
• As the population of Third World cities gets higher incomes, the priority will be
improving their housing conditions.
• On the long run, shantytowns are likely to disappear (or at least become less
significant).
 Shantytowns as Share of the Total Population
Addis Ababa, Ethi opia

Casablanca, Morocco

Calcutta, India

Cairo, Egypt

Ankara, Turkey

Bogota, Colombia

Caracas, Venezuela

Dar es Salaam , Tanzania

Mexico City

Karachi, Pakistan

Manill a, Phi lippines

Tunis, Tunisia

Jakarta, Indonesia

Rio de Janeiro, Bazil

New Delhi , India

0 10 20 30 40 50 60 70 80
 Human Capital:
Education and Health in
Economic Development
The Central Roles of Education and
Health
• Health and education are important objectives of development, as
reflected in Amartya Sen’s capability approach, and in the core values
of economic development
• Health and education are also important components of growth and
development – inputs in the aggregate production function
 Education and Health as Joint Investments
for Development
• These are investments in the same individual
• Greater health capital may improve the returns to investments in education
• Health is a factor in school attendance
• Healthier students learn more effectively
• A longer life raises the rate of return to education
• Healthier people have lower depreciation of education capital
• Greater education capital may improve the returns to investments in health
• Public health programs need knowledge learned in school
• Basic hygiene and sanitation may be taught in school
• Education needed in training of health personnel
Improving Health and Education: Why Increasing Incomes
Is Not Sufficient
• Increases in income often do not lead to substantial increases in
investment in children’s education and health
• But better educated mothers tend to have healthier children at any
income level
• Significant market failures in education and health require policy
action
 Investing in Education and Health: The Human Capital Approach

• Initial investments in health or education lead to a stream of higher

future income
• The present discounted value of this stream of future income is
compared to the costs of the investment
• Private returns to education are high, and may be higher than social
returns, especially at higher educational levels
Financial Trade-Offs in the Decision to Continue in School
Does each of the following scenarios describe an economic trade-off? Why or why not?

•After completing your undergraduate studies, you are trying to decide if you should enter the
workforce or continue your education in graduate school. By going into the workforce, you know
that you will potentially be missing out on higher earnings in the future. However, by staying in
school, you are not only going to have to pay thousands of dollars in tuition and book costs, but
you are also going to miss out on earning whatever pay you would have made at the job you
could have worked at.

•You go to a car dealership to buy a new car. You only have enough money to purchase one new
car and are trying to decide between buying a Ford Fusion and a Ford Explorer. In the end, you
decide to purchase the Fusion because you like the features more than the features in the
Explorer.

•You go to a restaurant for dinner with some friends. After looking at the menu, you decide that
the only thing that you really like is the cheeseburger. Therefore, you decide to get a
cheeseburger and water for dinner.
Sample Rates of Return to Investment in Education by Level of Education, Country,
Type, and Region
Child Labor
• Child labor is a widespread phenomenon
• The problem may be modeled using the “multiple equilibria” approach
• Government intervention may be called for to move to a ‘better’
equilibrium
• Sometimes this shift can be self-enforcing, so active intervention is
only needed at first
Other approaches to child labor policy
• Get more children into school (as in Millennium Development Goals), e.g.
new village schools; and enrollment incentives for parents
• Consider child labor an expression of poverty, so emphasize ending
poverty generally (a traditional World Bank approach, now modified)
• If child labor is inevitable in the short run, regulate it to prevent abuse and
provide support services for working children (UNICEF approach)
• Ban child labor; or if impossible, ban child labor in its most abusive forms
(ILO strategy; “Worst Forms of Child Labor Convention”)
• Activist approach: trade sanctions. Concerns: could backfire when
children shift to informal sector; and if modern sector growth slows
 The Gender Gap: Discrimination in Education and Health

• Young females receive less education than young males in nearly every low and
lower-middle income developing country
• Closing the educational gender gap is important because:
• The social rate of return on women’s education is higher than that of men in
developing countries
• Education for women increases productivity, lowers fertility
• Educated mothers have a multiplier impact on future generations
• Education can break the vicious cycle of poverty and inadequate schooling for
women
• Good news: Millennium Development Goals on parity being approached,
progress in every developing region
Youth Literacy Rate, 2008
The Gender Gap: Discrimination in Education and Health (cont’d)

• Consequences of gender bias in health and education

• Economic incentives and their cultural setting
• “Missing Women” mystery in Asia
• Increase in family income does not always lead to better health and
education
 Educational Systems and Development
• The Political Economy of Educational Supply and Demand: The
Relationship between Employment Opportunities and Educational
Demands
• Social versus Private Benefits and Costs
Educational Systems and Development
• Distribution of Education
• Lorenz curves for the distribution of education
• Education, Inequality, and Poverty
Lorenz Curves for Education in India and South Korea
Gini Coefficients for Education in 85 Countries
Educational Systems and Development
(cont’d)
• Educational supply and demand: the relationship between employment
opportunities and educational demands
• Social versus private benefits and costs
• Distribution of education
• Education, inequality, and poverty
• Education, Internal Migration, and the Brain Drain
Health Measurement and Distribution
• World Health Organization (WHO): The key United Nations agency
concerned with global health matters.
Life Expectancy in Various World Regions
Under-5 Mortality Rates in Various World Regions
Deaths of Children under Age 5
Children’s Likelihood to Die in Selected Countries
Proportion of Under-Five Children Who Are Underweight, by Household Wealth,
around 2008
Disease Burden
• HIV/AIDS
• Malaria
• Parasitic Worms and Other “Neglected Tropical Diseases”
Proportion of Children under 5 Who Are Underweight, 1990 and 2005
Regional HIV and AIDS Statistics, 2009
The Major Neglected Tropical Diseases, Ranked by Prevalence
Health, Productivity, and Policy
• Productivity
• Is there a connection?

• Health Systems Policy

• Great variability in the performance of health systems at each income level
Wages, Education, and Height of Males in Brazil and the United States
GNI Per Capita and Life Expectancy at Birth, 2002