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UNU-WIDER Inequality, Income and Poverty

Support functions

A teenager wears torn rubber boots in a muddy local market in Bac Ha, Viet Nam. As of 2005 figures, half the world population—more than 3 billion people–is estimated to live on less than USD 2.50 a day. Bac Ha, Viet Nam. UN Photo/Kibae Park.

Table of contents

WP/93 Inequality, Income and Poverty: Comparative Global Evidence

Analysing a large sample of 1980–2004 unbalanced panel data, the current study presents comparative global evidence on the role of (income) inequality in poverty reduction. The evidence involves both an indirect channel via the tendency of high inequality to decrease the rate at which income is transformed to poverty reduction and the tendency of rising inequality to increase poverty. Based on the basic needs approach, an analysis-of-covariance model is estimated, with the headcount measure of poverty as the dependent variable and the Gini coefficient and PPP-adjusted mean income as explanatory variables. The study finds that the responsiveness of poverty to income growth is a decreasing function of inequality and that the income elasticity of poverty is actually smaller than the inequality elasticity. Thus, income distribution can play a more important role than might be traditionally acknowledged. Found also is a large variation across regions (and countries) in the poverty effects of inequality.
Publisher:
UNU-WIDER
Series:
WIDER Working Paper
Volume:
2010/93
Title:
WP/93 Inequality, Income and Poverty: Comparative Global Evidence
Authors:
Augustin Kwasi Fosu
Publication date:
August 2010
ISBN 13 Web:
978-92-9230-331-0
Copyright holder:
© UNU-WIDER
Copyright year:
2010
Keywords:
inequality, income, poverty, comparative global evidence
JEL:
D31, I32, O49
Project:
New Directions in Development Economics
Sponsor:
UNU-WIDER gratefully acknowledges the financial contributions to the research programme by the governments of Denmark (Royal Ministry of Foreign Affairs), Finland (Ministry for Foreign Affairs), Sweden (Swedish International Development Cooperation Agency—Sida) and the United Kingdom (Department for International Development—DFID).
Format:
online and printed copies

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