EC 366

CONTEMPORARY ISSUES IN
ECONOMIC DEVELOPMENT

TOPIC: POVERTY ISSUES

 Definition:
 Poverty is a condition characterized by a lack of
resources, often measured in terms of income, to meet
basic human needs such as food, shelter, and clothing.
It can also encompass a lack of access to education,
healthcare, and other essential services, leading to a
diminished quality of life.
 Indicators of Poverty:
Indicators of poverty include:
 low income levels,
 inadequate access to education and healthcare,
 substandard housing,
 high unemployment rates, and insufficient access to clean water
and sanitation.
 Additionally, factors like malnutrition, limited economic
opportunities, and social exclusion contribute to the complexity
of measuring and addressing poverty.
 Causes of poverty:
 Lack of Education: Limited access to quality education can
hinder individuals from acquiring essential skills, reducing
their employability and perpetuating poverty.
 Limited Employment Opportunities: Insufficient job
opportunities, particularly in sectors that require specialized
skills, contribute to unemployment and underemployment,
sustaining poverty.
 Unequal Distribution of Resources: When resources such as
land, wealth, and opportunities are disproportionately
distributed, it leads to economic disparities and perpetuates
poverty among marginalized groups.
Causes cont…
 Political Instability and Corruption: Societies facing political
instability and high levels of corruption often struggle to
implement effective policies and allocate resources equitably,
exacerbating poverty.
 Economic Disparities: Widening gaps between the rich and poor
can create a cycle of poverty, as those with fewer resources find it
challenging to break out of their disadvantaged circumstances.
 Discrimination and Social Inequality: Discrimination based on
factors like gender, ethnicity, or race can limit access to
education, employment, and other opportunities, contributing to
persistent poverty.
.
Global poverty Trends:
the global poverty trend had shown progress over the preceding decades. The
percentage of people living in extreme poverty had been decreasing, thanks to
concerted international efforts and economic development in various regions.
• Global Poverty Reduction: The world had made significant strides in
reducing extreme poverty. Organizations like the World Bank and the United
Nations reported a decline in the proportion of people living in extreme
poverty, often defined as living on less than $1.90 a day (the international
poverty line).
• Regional Variations: Progress varied across regions, with some areas
experiencing faster poverty reduction than others. East Asia, for instance, had
seen substantial success in poverty alleviation, while challenges persisted in
parts of sub-Saharan Africa and South Asia.
Global poverty trend cont….
• Sustainable Development Goals (SDGs): The international community,
through initiatives like the United Nations’ Sustainable Development
Goals (SDGs), aimed to eliminate extreme poverty globally by 2030. These
goals encompassed various aspects, including education, healthcare, and
economic development.
• Challenges and Inequalities: Despite overall progress, challenges
remained, including issues of income inequality, access to education and
healthcare, and vulnerability to economic shocks. Inequality within
countries and between different regions was a concern.
• Impact of Events: Events such as economic recessions, conflicts, and
global health crises (like the COVID-19 pandemic) could influence
poverty trends. These events underscored the importance of resilience and
inclusive development strategies.
Theory of Poverty
Several theories attempt to explain the causes and perpetuation of
poverty, the following are the some the theories:
 Structural Theory: Focuses on societal structures and
institutions, suggesting that poverty is a result of systemic issues
such as economic policies, discrimination, and unequal
distribution of resources.
 Cultural Theory: Suggests that certain cultural beliefs and
behaviors contribute to poverty, emphasizing factors like values,
attitudes, and lifestyle choices that may impede economic
advancement.
Theory cont…
Human Capital Theory: Emphasizes the role of
education and skill development in poverty
alleviation, positing that individuals with higher
education and skills are more likely to escape
Cycle of Poverty Theory: Proposes that poverty
is self-perpetuating across generations, as
individuals born into impoverished
circumstances face limited opportunities for
education and
 Dependency Theory: Highlights the impact of global
economic structures on poverty, arguing that
developing nations can remain impoverished due to
unequal relationships with more powerful and
developed nations.
 Institutional Theory: Examines the influence of social
institutions, such as family structures and government
policies, on poverty, emphasizing how these
institutions shape opportunities and outcomes.
Poverty Indices and Measurement:

The term "Index of poverty” typically refers to a

quantitative measure or index used to assess and
quantify the extent of poverty within a specific
population or geographic area. These indices are often
constructed using various indicators, such as income
levels, access to education, healthcare, and other
essential services.
Poverty indices and measurement cont..

The goal is to provide a numerical representation of the

prevalence and severity of poverty, aiding
policymakers and researchers in understanding and
addressing socio-economic challenges. Popular
examples include the Human Development Index
(HDI) and the Multidimensional Poverty Index (MPI).
Poverty indices and measurement cont..

Poverty measurement refers to the process of

quantifying and assessing the extent of poverty within
a population or a specific geographic area. It involves
using various indicators, such as income, consumption,
education, healthcare, and living conditions, to gauge
the economic well-being and living standards of
individuals or groups.
Poverty indices and measurement cont..

The goal is to provide a numerical

representation or index that helps policymakers,
researchers, and organizations understand the
prevalence, severity, and distribution of
poverty, facilitating targeted interventions and
policy development.
Poverty indices and measurement cont..
The measure of Poverty include the following:

Headcount index
Poverty gap index
Squared poverty gap index
Sen Index.
Poverty indices and measurement cont..

The Sen-Shorrocks-Thon index.

Time taken to exit
Previous poverty pro