Working Papers in Economics
Arne Bigsten and Jörgen Levin
Growth, Income Distribution, and Poverty: A Review
Abstract: This paper reviews the recent literature dealing with the
relationships between economic growth, income distribution, and poverty.
This generally fails to find any systematic pattern of change in income
distribution during recent decades. Neither does it find any systematic
link from fast growth to increasing inequality. Some recent empirical
evidence has tended to confirm the negative impact of inequality on growth,
on the other hand. Others have found that the level of initial income
inequality is not a robust explanatory factor of growth, though high
inequality in the distribution of assets, such as land, has a significantly
negative effect on growth. Possible channels are credit rationing, reduced
possibilities for participation in the political process, and social
conflicts. Among the strategic elements that contributed to reduced poverty
are: an outward-oriented strategy of export-led growth, based on
labour-intensive manufacturing; agricultural and rural development, with
encouragement of new technologies; investment in physical infrastructure
and human capital; efficient institutions that provide the right set of
incentives to farmers and entrepreneurs; and social policies to promote
health, education, and social capital, as well as safety nets to protect
the poor. Countries that have been successful in terms of economic growth
are also very likely to be successful in reducing poverty. Poverty can be
reduced if there is sufficient economic growth. Growth can be substantial
if the policy and institutional environment is right.
Keywords: Growth; income distribution; poverty; economic policy; (follow links to similar papers)
JEL-Codes: O10; O20; (follow links to similar papers)
36 pages, November 13, 2000
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- This paper is published as:
Bigsten, Arne and Jörgen Levin, (2004), 'Growth, Income Distribution, and Poverty: A Review' in Shorrocks, Anthony and Rolph van der Hoeven (eds.) Growth, Inequality, and Poverty - Prospects for Pro-Poor Economic Development, chapter 12, Oxford University Press, ISBN 0-19-926865-7.
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