Poverty and Development

WEEK 3
Areas of economic development
• Poverty and Inequality: Addressing issues related to poverty alleviation, income distribution, and
reducing wealth disparities within a society.
• Industrial Policies: Designing policies to promote industrialization, fostering economic
diversification and competitiveness.
• Infrastructure Development: Including transportation, energy, and communication networks, to
support economic activities and improve connectivity.
• Human Capital Development: Enhancing education, healthcare, and workforce skills to improve
productivity, increase employability, and foster sustainable economic growth.
• Rural and Urban Development: Addressing the specific challenges faced by rural and urban
areas to promote balanced regional development.
• Social Development: Addressing social issues, such as healthcare, education, housing, and social
safety nets, to improve human development indicators and overall welfare.
• Regional Integration: Promoting regional economic integration through trade blocs and
cooperation to enhance market access and economic opportunities.
• Technology and Digital Economy: Harnessing technological advancements and digitalization to
drive economic growth and improve efficiency in various sectors.
Poverty
What is poverty?
Poverty
What is poverty?

Income Poverty: This is a traditional

measure of poverty that focuses on the
lack of sufficient income to meet basic
needs such as food, shelter, clothing,
and healthcare.

Multidimensional Poverty: The

multidimensional approach considers a
broader set of deprivations, including
lack of access to education, healthcare,
clean water, sanitation, and housing.
Global Poverty: Updated

The World Bank has

updated the methods it uses
to measure incomes and
poverty around the world.

Increase the global

poverty line rom $1,90 to
$2,15 a day.
Global Poverty: Updated

The World Bank has

updated the methods it uses
to measure incomes and
poverty around the world.

Increase the global

poverty line rom $1,90 to
$2,15 a day.
Global Poverty: Updated
What is PPP?

Purchasing Power Parity (PPP) is an international price index that measures the amount of money
needed to purchase a set of goods in real terms relative to a comparison country, often using a
comparison with the United States (Deaton & Aten, 2017)

Contoh:
The price of one banana in the United States is US$1, while the price of a similar banana in
Indonesia is Rp 500. So, the purchasing power parity (PPP) is US$0.002/rupiah.

What’s the implication of increasing PPP for developing countries?

Poverty in Developing Country
• 719 million people — 9.2% of the world’s population — are living on less than
$2,15 a day.
• Children and youth account for two-thirds of the world’s poor, and women
represent a majority in most regions.
• Extreme poverty is largely concentrated in sub-Saharan Africa.
• 24% of the world’s population, which equates to 1,9 billion people, live in fragile
contexts, characterized by impoverished conditions and dire circumstances.
• By 2030, more than half of the world’s poor will live in fragile contexts.
• About 63% of people older than 15 who live in extreme poverty have no schooling
or only some basic education.
• 1,2 billion people in 111 developing countries live in multidimensional poverty,
accounting for 19% of the world’s population.
• 593 million children are experiencing multidimensional poverty.
Poverty in Developing Country
The proportion of people living in extreme poverty by
region: 2002–2022.

In 1990, 53% of the global population

experiencing extreme poverty lived in
countries in the East Asia and Pacific
region; in 2022 they represented 4%.
Poverty in Developing Country
National trends in the proportion of people
living in extreme poverty: 1990–2022:

India have experienced the greatest reductions in

people living in extreme poverty, with over a
billion of their citizens moving out of extreme
poverty since 1990.

However, extreme poverty has increased in most

countries in Sub-Saharan Africa.
Triangle of Poverty-Inequality-Growth
What do you think about this triangle?

Worth to read:

Bourguignon, F. (2004). The Poverty-growth-inequality triangle. Indian Council for Research on International
Economic Relations, New Delhi, India.

Wan, G., Wang, C., & Zhang, X. (2021). The poverty-growth-inequality triangle: Asia 1960s to 2010s. Social
Indicators Research, 153, 795-822.
Snapshot: Gender Inequality
Gender Inequality Index
Factors Affecting Gender Inequality
• Labor Market Discrimination
• Gender Wage Gap
• Unpaid Care Work
• Access to Education and Skills The distribution of
Development
resources, opportunities,
• Representation in Leadership Positions and outcomes between
• Workplace Policies men and women
• Gender Norms and Social Expectations
• Access to Financial Services and
Resources
• Violence and Harassment
Poverty and Social Mobility
Social mobility refers to change in a person's socio-economic
situation, either in relation to their parents (inter-generational
mobility) or throughout their lifetime (intra-generational
mobility). The Organization for
Economic Cooperation
Across OECD countries, it takes nearly five generations for and Development (OECD)
children from low-income families to approach the average is a unique forum where the
governments of 37
income in their country.
democracies with market-
based economies
OECD citizens believe that 6 out of 10 poor children will collaborate to develop
remain poor as adults. policy standards to promote
sustainable economic
growth.
Around 65% of working-age OECD citizens worry they won't
be as financially secure as their parents; an almost equal share
fear their children will be even less secure.
Poverty and Social Mobility: Case of Indonesia

Worth to read:
Rizky, M., Suryadarma, D., & Suryahadi, A. (2019). Effect of growing up poor on labor market outcomes: Evidence from Indonesia (No. 1002).
ADBI Working Paper Series.
Global Social Mobility Index
Dimensions of Social
Mobility:
• Intergenerational
mobility
• Intragenerational
mobility
• Absolute income mobility
• Absolute educational
mobility
• Relative income mobility
• Relative educational
mobility
Global Social Mobility Index Framework

Worth to read:
Iversen, V., Krishna, A., & Sen, K.
(2021). Social mobility in developing countries:
Concepts, methods, and determinants (p. 512).
Oxford University Press.
Poverty and Informal Economy
Poverty and Informal Economy

A majority of
Indonesia’s poor
earn their
livelihoods in the
informal sector or
are unemployed
(Katadata, 2016)
Poverty and Informal Economy
The informal economy: route into or out of poverty?

Countries with high informality have a whole host of development challenges,

including:
• Higher poverty
• Lower per capita income
• Less progress towards the SDGs
• Greater inequality
• Less human capital
• Weaker productivity and investment
• Weaker governance