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How Much Does Reducing Inequality Matter for Global Poverty (English)

The goals of ending extreme poverty by 2030 and working toward a more equal distribution of income are prominent in international development and agreed upon in the United Nations' Sustainable Development Goals 1 and 10. Using data from 164 countries comprising 97 percent of the world's population, this paper simulates a set of scenarios for global poverty from 2018 to 2030 under different assumptions about growth and inequality. This allows for quantifying the interdependence of the poverty and inequality goals. The paper uses different assumptions about growth incidence curves to model changes in inequality and relies on the Model-based Recursive Partitioning machine-learning algorithm to model how growth in GDP is passed through to growth as observed in household surveys. When holding within-country inequality unchanged and letting GDP per capita grow according to International Monetary Fund forecasts, the simulations suggest that the number of extreme poor (living below $1.90/day) will remain above 550 million in 2030, resulting in a global extreme poverty rate of 6.5 percent. If the Gini index in each country decreases by 1 percent per year, the global poverty rate could reduce to around 5.4 percent in 2030, equivalent to 100 million fewer people living in extreme poverty. Reducing each country's Gini index by 1 percent per year has a larger impact on global poverty than increasing each country's annual growth 1 percentage point above the forecasts, suggesting an important role for inequality on the path to eliminating extreme poverty.

Details

  • Author

    Lakner,Christoph, Mahler,Daniel Gerszon, Negre,Mario, Prydz,Espen Beer

  • Document Date

    2019/05/30

  • Document Type

    Policy Research Working Paper

  • Report Number

    WPS8869

  • Volume No

    1

  • Total Volume(s)

    1

  • Country

    World,

  • Region

    The World Region,

  • Disclosure Date

    2019/05/30

  • Disclosure Status

    Disclosed

  • Doc Name

    How Much Does Reducing Inequality Matter for Global Poverty ?

  • Keywords

    Poverty and Equity; global poverty; Income and Expenditures Household Survey; household final consumption expenditure; millennium development goal; impact on poverty reduction; incidence curve; extreme poverty; high poverty line; national account; purchasing power parity; high growth rate; high poverty rate; measure of poverty; global poverty estimates; international poverty line; change in poverty; measure of inequality; consumer price index; bilateral development agencies; square poverty gap; inequality and growth; extreme poverty line; fight against poverty; decomposable poverty measure; inequality within country; inequality will; eradication of poverty; lump sum transfer; overseas development institute; reducing inequality; welfare aggregate; Poverty measures; income share; robustness check; inequality change; headcount ratio; real gdp; functional form; increasing growth; geographical region; annualized change; inclusive growth; regional poverty; historical growth; poverty projection; welfare distribution; higher growth; Exchange Rates; transfer scheme; tax rate; hypothesis testing; comparable data; income inequality; decision tree; Poverty Measurement; interaction coefficient; policy relevance; machine learning; development policy; yield increase; reduced inequality; increase growth; aggregation method; Population Projection; population data; price difference; aggregate welfare; consumption aggregate; regional distribution; consumption survey; income variable; data type; significant evidence; world population; welfare measure; capita growth; emerging economy; Emerging economies; data coverage; monitoring poverty; initial distribution; severely limits; Fiscal policies; equal distribution; asian study; explaining inequality; worldwide income; welfare measurement; sensitivity analysis; measuring growth; measuring poverty; global development; poverty goal; poverty impact; fiscal policy; decreasing inequality; increase poverty; poverty matters; baseline assumptions; moderate poverty; open access; resource transfer; online tool; Spring Meeting; Population Growth; global estimate; redistributing resource; tax increase; poor household; global inequality; public policy; linear tax; global target; inequality level; empirical example; observed growth; middle class; conceptual framework; Learning and Innovation Credit; empirical support; cross-country regression; inequality reduction

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Citation

Lakner,Christoph Mahler,Daniel Gerszon Negre,Mario Prydz,Espen Beer

How Much Does Reducing Inequality Matter for Global Poverty (English). Policy Research working paper,no. WPS 8869,Paper is funded by the Strategic Research Program (SRP) Washington, D.C. : World Bank Group. http://documents.worldbank.org/curated/en/328651559243659214/How-Much-Does-Reducing-Inequality-Matter-for-Global-Poverty